An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record:

Question

Quizplus · Accepted Answer

To calculate the gain or loss on sale, we need to compare the selling price with the asset's book value. 
Book value as of December 31, Year 5 = $18,000 - $3,000 = $15,000 
Selling price = $15,000

Since the selling price is less than the book value, a loss on sale is recognized. 
Loss on sale = Book value - Selling price = $15,000 - $18,000 = $-3,000 (which is a loss of $3,000)

An Asset's Book Value Is $18,000 on December 31, Year