A company sells a plant asset that originally cost $375,000 for $125,000 on December 31, 2017. The accumulated depreciation account had a balance of $150,000 after the current year's depreciation of $37,500 had been recorded. The company should recognize a
A)$250,000 loss on disposal.
B)$100,000 gain on disposal.
C)$100,000 loss on disposal.
D)$62,500 loss on disposal.

Question

Quizplus · Accepted Answer

The book value of the asset is its original cost minus its accumulated depreciation: 
Book value = $375,000 - $150,000 = $225,000

Since the company sold the asset for $125,000, it incurred a loss on disposal: 
Loss on disposal = $125,000 - $225,000 = -$100,000

Therefore, the correct answer is C) $100,000 loss on disposal.

A Company Sells a Plant Asset That Originally Cost $375,000