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Homework answers / question archive / 1) An asset's book value is $18,000 on December 31, Year 5

1) An asset's book value is $18,000 on December 31, Year 5

Accounting

1) An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $20,000, the company should record:

Select one:

a. Neither a gain nor a loss is recognized on this transaction.

b. A gain on sale of $2,000.

c. A gain on sale of $13,000.

d. A loss on sale of $13,000.

2) An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record:

Multiple Choice

  • A gain on sale of $3,000.

  • A loss on sale of $3,000.

  • Neither a gain nor a loss is recognized on this transaction.

  • A gain on sale of $12,000.

  • A loss on sale of $12,000.

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Answer:

1.

Ans - A gain on sale of $2000

Gain or loss on sale of asset = (Sale value - Book value of asset on the date of sale)
=> ($20000 - $18000)
=> $2000 gain on sale

2.

Answer: A Loss on sales of $3000

Loss on sales of Assets = Book Value on Date of sales - Sold For

= 18,000-15,000 = 3000 Loss