Question

An asset's book value is $14,400 on January 1, Year 6. The asset is being depreciated $200 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $9,300, the company should record:

A. Neither a gain or loss is recognized on this type of transaction

B. A gain on sale of 1,500

C. A loss on sale of 750

D. A gain on sale of 750

E. A loss on sale of 1,500

Answer 1

	Depreciation per month				200
	number of months in a year				12
	Depreciation per year				2400
	total acccumulated depreciation till july 1,year 7
	Depreciation for year 6 (2400*6)=					2,400
	Depreciation for 6 months year 7 (200*6)=					1200
	total acccumulated depreciation till july 1,year 7					3600
	gain or loss on sale
	Depreciated value on year 6					14,400
	less accumulated depreciation					-3600
	Book value on july1,year 7					10,800
	sale value					9,300
	loss on sale					1,500
	option E	A loss on sale of $1,500
		answer