Drezworx buys a specialty table saw for its metal fabrication business on January 1, 2023. The machine cost $350,000 and is expected to be used for five years. At the end of the five years the machine is expected to have a market value of $15,000, at which time the company plans to sell it. The company’s fiscal year ends December 31.

Instructions:

Prepare a table that shows the depreciation expense for each of the five years using the straight-line method. The table should show each year, its depreciation expense for each year, and the amount of the accumulated depreciation at the end of each year. (So, setting the table up with three columns and six rows, one row for headings, makes sense.)

Show or state clearly what would be reported on the income statement and the balance sheet related to this asset in the financial statements of the annual report for the year ended December 31, 2026.

On January 1, 2027, the company decides to sell the machine immediately. Calculate the gain or loss on sale if the company sells the saw on January 1, 2027 for $100,000. Clearly indicate whether it is a gain or a loss by showing the calculation and stating whether the amount is a gain or a loss.