Question

Helen had a business asset that she acquired for $50,000 and she took $40,000 of expensing on the asset. She the sold the asset for $50,000. What was her gain on the sale?

Answer 1

Gain on sale of asset means the value received by sale of asset minus carrying value of an asset.

Carrying value means purchase price of an asset less depreciation expense and any impairment charges.

Here in this question expensed word is used not capitalized so expenses which increases value of an asset are capitalized to asset not expensed to asset.

So, carrying value will be purchase price less expensed amount i.e $50000 less $40000 = $10000

Now gain will be sale amount less carrying value

= $50000 less $10000

= $40000 gain on sale of Helen asset