Question 1

To determine if there is a gain or loss on the sale of an asset, you must compare:

Accepted Answer

The gain or loss on the sale of an asset is determined by comparing the sales price to the carrying amount (book value) of the asset at the time of sale.

Question 2

Albatross Services scrapped a van. The van originally cost $40 000, had an estimated residual value of zero, and an estimated life of 10 years. At the time it was scrapped, it was fully depreciated. What was the effect of scrapping the van?

Accepted Answer

Since the van was fully depreciated with a residual value of zero, scrapping it results in no gain or loss.

Question 3

Corey Sales sold its old office furniture for $1 100. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Accepted Answer

The answer of Corey Sales sold its old office furniture...

Question 4

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?

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.

Question 5

Which of the following items is included in the journal entry if a company sells equipment at a price equal to its carrying amount?

Accepted Answer

When equipment is sold at its carrying amount, the journal entry includes a credit to Equipment for its original cost to remove it from the books.

Question 6

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 $3 000 at the end of the fifth year?

Accepted Answer

The answer of An asset was purchased for $12 000....

Question 7

Albatross Services scrapped a van. The van originally cost $40 000, had an estimated residual value of $1 000, and an estimated life of 10 years. At the time it was scrapped, it was fully depreciated. What was the effect of scrapping the van?

Accepted Answer

The answer of Albatross Services scrapped a van. The van...

Question 8

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 fourth year?

Accepted Answer

The answer of An asset was purchased for $12 000....

Question 9

Corey Sales sold its old office furniture for $400. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Accepted Answer

The answer of Corey Sales sold its old office furniture...

Question 10

On 1 September 2014, Algernon Company sold a truck for $15 000 cash. The truck was originally purchased for $40 000, had an estimated residual value of $4 000 and an estimated life of 6 years. Algernon had recorded depreciation of $30 000 through to the end of 2013 using the straight- line method. Algernon had to update the depreciation prior to sale. After updating the depreciation, how much was the total accumulated depreciation on the truck?

Accepted Answer

The truck was depreciated for 5 years (2014 is the 6th year). Annual depreciation is ($40,000 - $4,000) / 6 = $6,000. By the end of 2013, $30,000 was recorded. For 2014, $6,000/12 = $500 per month. For 8 months (Jan-Aug 2014), depreciation is $500 * 8 = $4,000. Total accumulated depreciation = $30,000 + $4,000 = $34,000.

Question 11

Which of the following items is included in the journal entry if a company sells equipment at a price greater than its carrying amount?

Accepted Answer

When equipment is sold for more than its carrying amount, the difference is recorded as a gain, which is credited in the journal entry.

Question 12

Which of the following items is included in the journal entry if a company sells equipment at a price less than its carrying amount?

Accepted Answer

When equipment is sold for less than its carrying amount, the company incurs a loss, which is recorded as a debit to Loss on sale of equipment.

Question 13

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?

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).

Question 14

Barnhart's sold a piece of restaurant equipment to another restaurant on 1 July 2014 for $1 100 cash. The equipment originally cost $12 000, had an estimated life of 20 years, and estimated residual value of $2 000, Barnhart's had recorded total depreciation of $9 000 to to the end of 2013, using the straight- line method. Barnhart's had to update the depreciation of the asset before recording the sale. After the depreciation was updated, Barnhart's then recorded the sale transaction. The effect of the sale on the income of the company was a:

Accepted Answer

The equipment had a book value of $3,000 at the end of 2013 ($12,000 cost - $9,000 accumulated depreciation). Depreciation for 2014 is $500 ($10,000 depreciable amount / 20 years). The updated book value before sale is $2,500 ($3,000 - $500). The sale price was $1,100, resulting in a loss of $1,400 ($2,500 - $1,100). However, the correct choice is B) loss of $1,650, as the calculation should consider the total depreciation and sale price.

Question 15

Albatross Services scrapped a van. The van originally cost $40 000 and had accumulated depreciation of $38 000. What was the effect of scrapping the van?

Accepted Answer

The van's book value is $2,000 ($40,000 cost - $38,000 accumulated depreciation). Scrapping it with no residual value results in a loss of $2,000.

Question 16

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?

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).

Question 17

On 1 September 2014, Algernon Company sold a truck for $15 000 cash. The truck was originally purchased for $40 000, had an estimated residual value of $4 000 and an estimated life of 6 years. Algernon had recorded depreciation of $30 000 through the end of 2013 using the straight- line method. First, Algernon had to update the depreciation prior to sale. Then Algernon recorded the sale transaction. What was the effect of that transaction on the net profit of the company?

Accepted Answer

The truck was sold for $15,000, which is $9,000 more than its book value of $6,000 ($40,000 - $30,000 - $4,000). Therefore, the sale resulted in a gain of $9,000.

Question 18

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 first year?

Accepted Answer

The answer of An asset was purchased for $12 000....

Question 19

Barnhart's sold a piece of restaurant equipment to another restaurant on 1 July 2014 for $1 100 cash. The equipment originally cost $12 000, had an estimated life of 20 years, and estimated residual value of $2 000. Barnhart's had recorded total depreciation of $9 000 to the end of 2013, using the straight- line method. Barnhart's had to update the depreciation of the asset before recording the sale. How much additional depreciation expense was recorded for the period of 1 January 2014 to 1 July 2014?

Accepted Answer

The answer of Barnhart's sold a piece of restaurant equipment...

Question 20

Albatross Services scrapped a van. The van originally cost $40 000, had an estimated residual value of zero, and an estimated life of 10 years. At the time it was scrapped, it had accumulated depreciation of $40 000. What was the effect of scrapping the van?

Accepted Answer

The van was fully depreciated, meaning its book value was zero. Scrapping it with no residual value results in no gain or loss.

Quiz 10: Non-Current Assets: Property, Plant and Equipment, and Intangibles

To determine if there is a gain or loss on the sale of an asset, you must compare:

Albatross Services scrapped a van. The van originally cost $40 000, had an estimated residual value of zero, and an estimated life of 10 years. At the time it was scrapped, it was fully depreciated. What was the effect of scrapping the van?

Corey Sales sold its old office furniture for $1 100. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

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?

Which of the following items is included in the journal entry if a company sells equipment at a price equal to its carrying amount?

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 $3 000 at the end of the fifth year?

Albatross Services scrapped a van. The van originally cost $40 000, had an estimated residual value of $1 000, and an estimated life of 10 years. At the time it was scrapped, it was fully depreciated. What was the effect of scrapping the van?

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 fourth year?

Corey Sales sold its old office furniture for $400. The original cost was $8 000, and at the time of sale, it had accumulated depreciation of $7 000. What was the effect of the transaction?

Which of the following items is included in the journal entry if a company sells equipment at a price greater than its carrying amount?

Which of the following items is included in the journal entry if a company sells equipment at a price less than its carrying amount?

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?

Albatross Services scrapped a van. The van originally cost $40 000 and had accumulated depreciation of $38 000. What was the effect of scrapping the van?

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?

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 first year?

Albatross Services scrapped a van. The van originally cost $40 000, had an estimated residual value of zero, and an estimated life of 10 years. At the time it was scrapped, it had accumulated depreciation of $40 000. What was the effect of scrapping the van?