Motor Sales sold its old office furniture for $9000. The original cost was $17,000, and at the time of sale, accumulated depreciation was $14,000. What is the effect of this transaction?

Question

Quizplus · Accepted Answer

The gain or loss on the sale of an asset can be calculated by subtracting the book value of the asset from the amount received from the sale. In this case, the book value of the furniture is calculated as follows:

Book Value = Original Cost - Accumulated Depreciation
Book Value = $17,000 - $14,000
Book Value = $3,000

Since the amount received from the sale is $9,000, the gain would be:

Gain = Sale Price - Book Value
Gain = $9,000 - $3,000
Gain = $6,000

Therefore, the effect of this transaction is a gain of $6,000 (not a loss or a gain of $9,000).

Motor Sales Sold Its Old Office Furniture for $9000