A company sells a plant asset which originally cost $360,000 for $120,000 on December 31, 2015. The Accumulated Depreciation account had a balance of $144,000 after the current year's depreciation of $36,000 had been recorded. The company should recognize a

Question

Quizplus · Accepted Answer

The book value of the asset before disposal can be calculated as follows:
Book Value = Original Cost - Accumulated Depreciation
Book Value = $360,000 - $144,000
Book Value = $216,000
Since the selling price of the asset is $120,000, the company will recognize a loss on disposal, which can be calculated as:
Loss on Disposal = Book Value - Selling Price
Loss on Disposal = $216,000 - $120,000
Loss on Disposal = $96,000
Therefore, the company should recognize a $96,000 loss on disposal.

A Company Sells a Plant Asset Which Originally Cost $360,000