A plant asset cost $90000 when it was purchased on January 1 2010. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30 2017 the asset was discarded with no cash proceeds. What gain or loss should be recognized on the retirement?

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the retirement of the asset, we need to determine its carrying value on June 30, 2017. The asset had a cost of $90,000 and was depreciated over 9 years, which is equivalent to 108 months (9 x 12). As of June 30, 2017, the asset had been in use for 90 months (from January 1, 2010, to June 30, 2017, inclusive). Therefore, the accumulated depreciation is:
Depreciation per month = ($90,000 / 108) = $833.33
Accumulated depreciation = ($833.33 x 90) = $74,999.70
Carrying value = Cost - Accumulated depreciation = $90,000 - $74,999.70 = $15,000.30
Since the asset was discarded with no cash proceeds, the loss on retirement is equal to its carrying value, which is $15,000.30. Therefore, the correct answer is C, $15,000 loss.

A Plant Asset Cost $90000 When It Was Purchased on January