On January 1, 2007, the Accumulated Depreciation-Machinery account of a particular company showed a balance of $370,000. At the end of 2007, after the adjusting entries were posted, it showed a balance of $395,000. During 2007, one of the machines which cost $125,000 was sold for $60,500 cash. This resulted in a loss of $4,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2007?

To determine the depreciation expense for 2007, we need to consider the change in the Accumulated Depreciation-Machinery account throughout the year.

First, we need to calculate the depreciation for the machine that was sold. The loss on disposal is equal to the book value of the machine minus the selling price. In this case, the loss is $4,000, and the selling price is $60,500.

Book value = Cost of machine - Accumulated depreciation
Book value = $125,000 - $X

Loss on disposal = Book value - Selling price
-$4,000 = ($125,000 - $X) - $60,500

Now, let's solve for X:

-$4,000 = $125,000 - $X - $60,500
-$X = -$68,500
X = $68,500

So, the Accumulated Depreciation-Machinery account after the sale is $68,500.

Now, let's calculate the depreciation expense for the year. The change in the Accumulated Depreciation-Machinery account from the beginning to the end of the year represents the depreciation expense for the year.

Change in Accumulated Depreciation = Ending balance - Beginning balance
Change in Accumulated Depreciation = $395,000 - $370,000
Change in Accumulated Depreciation = $25,000

Since the sale of the machine reduced the Accumulated Depreciation-Machinery account by $68,500, we need to adjust the change in Accumulated Depreciation by that amount.

Adjusted Change in Accumulated Depreciation = Change in Accumulated Depreciation - Adjustment for the sale
Adjusted Change in Accumulated Depreciation = $25,000 - $68,500
Adjusted Change in Accumulated Depreciation = -$43,500

Since accumulated depreciation represents the total depreciation expense over time, the negative value indicates that the expense exceeded the depreciation for the year.

Therefore, the depreciation expense for 2007 is $43,500.