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 $400 at the end of the fifth year?

Question

Quizplus · Accepted Answer

The annual depreciation is ($12,000 - $2,000) / 5 = $2,000. After 5 years, the book value is $2,000. Selling for $400 results in a $1,600 loss ($2,000 - $400).

An Asset Was Purchased for $12 000