An asset's book value is $18,000 on June 30,Year 6.The asset is being depreciated at an annual rate of $3,000 on the straight-line method.Assuming the asset is sold on December 31,Year 7 for $15,000,the company should record:
A)A loss on sale of $1,500.
B)A gain on sale of $1,500.
C)Neither a gain nor a loss is recognized on this type of transaction.
D)A gain on sale of $3,000.
E)A loss on sale of $3,000.

Question

Quizplus · Accepted Answer

If the asset's book value is $18,000 on June 30, Year 6 and is being depreciated at a rate of $3,000 per year, an additional $4,500 of depreciation expense would be recognized by December 31, Year 7. Thus, the asset's book value on that date would be $13,500. If the asset is sold for $15,000, a gain on sale of $1,500 should be recognized.

An Asset's Book Value Is $18,000 on June 30,Year 6