An asset that costs $18,800 and has accumulated depreciation of $6,000 is sold for $11,600.What amount of gain or loss will be recognized when the asset is sold?
A)A gain of $1,200.
B)A loss of $1,200.
C)A loss of $7,200.
D)A gain of $7,200.

Question

Quizplus · Accepted Answer

The book value (or carrying value) of the asset is calculated as:
Cost of asset - Accumulated depreciation
= $18,800 - $6,000
= $12,800

Since the asset is sold for $11,600, there is a loss on sale:
= Sales price - Book value
= $11,600 - $12,800
= -$1,200 (negative sign indicates a loss)

Therefore, the correct answer is B, a loss of $1,200.

An Asset That Costs $18,800 and Has Accumulated Depreciation of $6,000