An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

Question

Quizplus · Accepted Answer

To determine the gain or loss on the sale of the asset, we need to calculate the asset's book value on the date of sale.

The asset was depreciated for 18 months ($500 per month) from January 1, Year 6 to June 30, Year 7, which amounts to a total accumulated depreciation of $9,000 ($500 x 18).

Therefore, the asset's book value on July 1, Year 7, is $27,000 ($36,000 - $9,000).

Since the asset was sold for only $25,000, the company will record a loss on the sale of $2,000 ($25,000 - $27,000), which is option A.

An Asset's Book Value Is $36,000 on January 1, Year