Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $90,000 cash was received from the sale.

Question

Quizplus · Accepted Answer

The sale of equipment for a loss implies that the cash received from the sale is less than the net book value of the equipment.

Net book value = Cost of the equipment - Accumulated depreciation 
Net book value = $100,000 - $40,000 
Net book value = $60,000

A loss of $10,000 implies that the cash received from the sale was:
Cash received = Net book value - Loss 
Cash received = $60,000 - $10,000 
Cash received = $50,000

Therefore, the correct answer is B - $90,000 cash was not received from the sale.

Equipment Costing $100,000 with Accumulated Depreciation of $40,000 Is Sold