A company sells a plant asset that originally cost $240,000 for $80,000 on December 31, 2014. The accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $20,000 had been recorded. The company should recognize a
A) $40,000 loss on disposal.
B) $40,000 gain on disposal.
C) $80,000 loss on disposal.
D) $80,000 gain on disposal.

Question

Quizplus · Accepted Answer

The book value of the asset is $120,000 ($240,000 cost - $120,000 accumulated depreciation). Selling it for $80,000 results in a $40,000 loss ($120,000 book value - $80,000 sale price).

A Company Sells a Plant Asset That Originally Cost $240,000