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 $4 500 at the end of the third year?

Question

Quizplus · Accepted Answer

The annual depreciation is ($12,000 - $2,000) / 5 = $2,000. After 3 years, accumulated depreciation is $2,000 * 3 = $6,000. The book value is $12,000 - $6,000 = $6,000. Selling for $4,500 results in a $1,500 loss ($6,000 - $4,500).

An Asset Was Purchased for $12 000