A company sells a long-lived asset which originally cost $150,000 for $50,000 on December 31, 2017. The accumulated depreciation account had a balance of $60,000 after the current year's depreciation of $15,000 had been recorded. The company should recognize a
A) $100,000 loss on disposal.
B) $40,000 gain on disposal.
C) $40,000 loss on disposal.
D) $25,000 loss on disposal.

Question

Quizplus · Accepted Answer

The loss on disposal is computed as follows: 
$50,000 (selling price) - $90,000 (book value) = -$40,000
Since the book value exceeds the selling price, a loss on disposal occurs. Therefore, the correct answer is C.

A Company Sells a Long-Lived Asset Which Originally Cost $150,000