Question

Perla sold the last depreciable asset in Class 6 for $200,000. The undepreciated capital cost was $210,000 at the time of the sale. The asset cost $250,000 when it was purchased. What amount is to be reported in net income for tax purposes?

options:

	Terminal Loss $40,000
	Terminal Loss $10,000
	Capital Loss $10,000
	Capital Loss $50,000

Answer 1

If the selling price of the assets is less than undepreciated value of assets is known as 'Terminal Loss. and if the selling price of the assets is more than undepreciated value of assets is known as 'Recapture.

It is calculated by the following formula:

Given that:

Selling Price of an Asset = $200,000

Undepreciated value of Asset = $210,000

So selling Price is less than undepreciated value of Asset

Terminal Loss =  Selling Price of an Asset -  Undepreciated value of Asset

Terminal Loss = $200,000 - $210,000

Terminal Loss = ($10,000)

Terminal Loss is $10,000

So correct answer is option(2) or Terminal Loss $10,000