On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $215,000 with an accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $20,000. What is the amount of the gain or loss on this transaction?
A) Gain of $20,000
B) Loss of $10,000
C) No gain or loss
D) Cannot be determined

Question

Quizplus · Accepted Answer

We need to calculate the book value of the equipment, which is the initial cost minus accumulated depreciation: $215,000 - $185,000 = $30,000. Since the selling price is lower than the book value, there is a loss on the transaction. The amount of the loss is the book value minus the selling price: $30,000 - $20,000 = $10,000. Therefore, the correct answer is B, loss of $10,000.

On December 31, Strike Company Has Decided to Sell One