At the beginning of the current year, a firm purchased an asset for $60,000 and estimates that it will have a useful life of six years and a salvage value of $6,000. The asset will be depreciated using the straight-line method. The asset was sold for $36.000 at the beginning of the fourth year of use. What is the amount of gain or loss recognized on the sale?

Question

Quizplus · Accepted Answer

The annual depreciation is ($60,000 - $6,000) / 6 = $9,000. After three years, accumulated depreciation is $9,000 * 3 = $27,000. The book value at the beginning of the fourth year is $60,000 - $27,000 = $33,000. The asset was sold for $36,000, resulting in a gain of $36,000 - $33,000 = $3,000.

At the Beginning of the Current Year, a Firm Purchased