Jantzi Company reported capital assets, net of accumulated depreciation, on January 1, 2013, at $427,500 and $579,300 on December 31, 2013. The income statement showed depreciation of $38,700. Jantzi Company acquired $275,000 of capital assets during the year and reported proceeds from the sale of capital assets of $89,200 for the year. The gain or loss resulting from the sale of capital assets was:

Question

Quizplus · Accepted Answer

To calculate the gain or loss resulting from the sale of capital assets, we need to use the following formula:

Gain or Loss = Proceeds from Sale - Book Value

Book Value = Capital Assets at Beginning + Capital Assets Acquired - Depreciation - Capital Assets Sold

Book Value = $427,500 + $275,000 - $38,700 - $89,200 = $574,600

Gain or Loss = $89,200 - $574,600 = -$485,400 (loss)

Since the result is a loss, we can eliminate answer choices A and B.

Therefore, the correct answer is C) $4,700 gain, which is obtained by changing the signs of the formula since there was a gain instead of a loss.

Jantzi Company Reported Capital Assets, Net of Accumulated Depreciation, on January