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 end 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 expense is calculated as (Cost - Salvage Value) / Useful Life = ($60,000 - $6,000) / 6 = $9,000. After 4 years, the total depreciation is $9,000 * 4 = $36,000. The book value at the time of sale is Cost - Accumulated Depreciation = $60,000 - $36,000 = $24,000. The sale price is $36,000, so the gain on sale is $36,000 - $24,000 = $12,000.

At the Beginning of the Current Year, a Firm Purchased