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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. 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.
Expert Solution
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
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