An asset was acquired on September 30, 2018, for $100,000 with an estimated 5-year life and $20,000 residual value. The company uses double-declining-depreciation. Calculate the gain or loss if the asset was sold on December 31, 2019, for $50,000. Partial-year depreciation is to be calculated.
A) $1,200 gain.
B) $14,000 gain.
C) $16,000 loss.
D) $4,000 loss.

Question

Quizplus · Accepted Answer

Total time period the asset is held is one year and three months = 1.25 years.
Accumulated depreciation = ($100,000 × 40%) + [($100,000 ? $40,000) × 40% × ¼)] = $46,000.
Book value = $100,000 - $46,000 = $54,000.
Gain = $50,000 - $46,000 = $4,000.

An Asset Was Acquired on September 30, 2018, for $100,000