An asset was purchased for $24,000. The asset's estimated useful life was 5 years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate the gain or loss on sale if the asset is sold for $18,000 at the end of the first year.

Question

Quizplus · Accepted Answer

Using the straight-line method, the annual depreciation is ($24,000 - $4,000) / 5 = $4,000.
After one year, the accumulated depreciation is $4,000. Therefore, the book value of the asset is $20,000.
If the asset is sold for $18,000, there is a loss of $2,000 ($18,000 - $20,000).
Therefore, the answer is (B) $2,000 loss.

An Asset Was Purchased for $24,000