Question

Hoot Corp has a delivery van it uses for business purposes. The van was purchased on Jan 1, 2017, had a cost of 32,000, and a salvage value of 4,000. It's estimated life is 4 years. If Hoot sells this van at the beginning of 2020 (Jan 1) for 13,000, what is the gain or loss recognized on this disposal? (multiple choice)

A. 2,000 Loss

B. 5,000 Gain

C. 2,000 Gain

D. 5,000 Loss

Answer 1

Ans.

On Jan 1, 2017 ,

cost of delivery van =32,000.

Salvage value =4,000.

Estimated life is 4 years.

Hoot sell van on Jan, 1, 2020 = 3 years from purchase

No of years =3 years.

Accumulated Depreciation =

=Cost of Assets - Salvage Value / life of asset * no of years

=32,000 - 4000 / 4 * 3

=21,000.

Estimated selling price =32,000-21,000

=11,000.

Gain on disposal of asset = actual selling price -

Estimated selling price

=13,000 -11,000

=2,000.

Thus , gain on disposal is option C . 2000 Gain.