1 answer

An asset's book value is $18,100 on December 31, Year 5. The asset has been depreciated...

Question:

An asset's book value is $18,100 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,100 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,100, the company should record:

  • A loss on sale of $3,000.

  • A gain on sale of $3,000.

  • A gain on sale of $1,650.

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

  • A loss on sale of $1,650.


Answers

Answer:

Option 1st is correct. i.e loss $3,000

Book Value on Date of Sale = $ 18,100

Selling Price = $ 15,100

Since the Selling Price is less than the Book Value on Date of Sale , there is a loss incurred.

Loss on Sale = Selling Price -Book Value on Date of Sale

= $ 15,100 - $ 18,100

= $ 3,000

A loss on sale of $3,000

.

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