An asset was purchased for $12,000. The asset's estimated useful life was 3 years and its residual value was $2,000. How much gain or loss is reported if the asset is sold for $5,333 at the beginning for the third year if the straight line method of depreciation was used?

Question

Quizplus · Accepted Answer

The asset's annual depreciation is ($12,000 - $2,000) / 3 = $3,333. After 2 years, accumulated depreciation is $6,666. The book value at the beginning of the third year is $12,000 - $6,666 = $5,334. Selling for $5,333 results in no significant gain or loss.

An Asset Was Purchased for $12,000