An asset was purchased for $12 000. The asset's estimated useful life was 5 years, and its residual value was $2 000. Straight- line depreciation was used. How much gain or loss is reported if the asset is sold for $9 000 at the end of the second year?

Question

Quizplus · Accepted Answer

The annual depreciation is ($12,000 - $2,000) / 5 = $2,000. After 2 years, accumulated depreciation is $4,000. The book value is $12,000 - $4,000 = $8,000. Selling for $9,000 results in a $1,000 gain.

An Asset Was Purchased for $12 000