A company sells a long-term asset that originally cost $180,000 for $60,000 on December 31, 2008.The accumulated depreciation account had a balance of $72,000 after the current year's depreciation of $18,000 had been recorded.The company should recognize a

Question

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To calculate the gain or loss on disposal of the long-term asset, we need to use the following formula:

Net Proceeds = Selling Price - Accumulated Depreciation

In this case, the net proceeds of the sale would be:

$60,000 - $72,000 = -$12,000

Since the net proceeds are negative, this means the company incurred a loss on disposal. The amount of the loss would be the absolute value of the net proceeds, which is $12,000.

However, we need to also consider the original cost of the asset. Since the asset originally cost $180,000 and was sold for $60,000, the company had a total loss of $120,000 ($180,000 - $60,000).

Therefore, the company should recognize a $48,000 loss on disposal ($12,000 net proceeds loss + $36,000 loss due to original cost).

A Company Sells a Long-Term Asset That Originally Cost $180,000