A company sells a long-lived asset that originally cost $200,000 for $50,000 on December 31,2014.The accumulated depreciation account had a balance of $110,000 after the current year's depreciation of $45,000 had been recorded.The company should recognize a:
A)$100,000 loss on sale.
B)$40,000 gain on sale.
C)$40,000 loss on sale.
D)$25,000 loss on sale.

Question

Quizplus · Accepted Answer

The book value of the long-lived asset is calculated as follows: 
Original cost - Accumulated depreciation = Book value 
$200,000 - $110,000 = $90,000

Since the asset was sold for $50,000, the company incurred a loss on the sale. The loss on sale is calculated as follows: 
Proceeds from sale - Book value = Loss on sale 
$50,000 - $90,000 = -$40,000

Therefore, the correct answer is C, a $40,000 loss on sale.

A Company Sells a Long-Lived Asset That Originally Cost $200,000