An asset was purchased for $36,000.The asset's estimated useful life was five years and its residual value was $10,000.The straight-line method of depreciation was used.Calculate the gain or loss on sale if the asset is sold for $19,000 at the end of the first year.

Question

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Using the straight-line method, each year the value decreases by $5,200. At the end of the first year, the asset's book value is $30,800 ($36,000 - ($5,200 x 1)). If the asset is sold for $19,000, the loss on sale would be $11,800 ($30,800 - $19,000).

An Asset Was Purchased for $36,000