A company sells a plant asset which originally cost ¥420,000 for ¥140,000 on December 31, 2014. The Accumulated Depreciation account had a balance of ¥168,000 after the current year's depreciation of ¥42,000 had been recorded. The company should recognize a

Question

Quizplus · Accepted Answer

To determine the gain or loss on disposal, we need to compare the selling price (¥140,000) with the book value of the asset:
Book Value = Original Cost - Accumulated Depreciation
Book Value = ¥420,000 - ¥168,000
Book Value = ¥252,000

Since the asset was sold for less than the book value, there is a loss on disposal. The amount of the loss is:
Loss on Disposal = Book Value - Selling Price
Loss on Disposal = ¥252,000 - ¥140,000
Loss on Disposal = ¥112,000

Therefore, the company should recognize a loss on disposal of ¥112,000.

A Company Sells a Plant Asset Which Originally Cost ¥420,000