Question

8. If a long-lived asset was sold before the end of its estimated useful life, the gain or loss on disposal is found by subtracting

a. the book value from the cash received.

b. accumulated depreciation from the original cost of the asset.

c. the original cost of the asset from the asset’s book value.

d. the asset’s book value from the original cost of the asset.

9. A truck costing $40,000 was purchased on January 1, 2006. The straight-line depreciation method was used, with the truck having an estimated useful life of 4 years and a salvage value of $4,000. If the truck is sold at the end of 2007 for $25,000, how much gain or loss will be recognized?

a. $3,000 loss    c. $3,000 gain

b. $5,000 gain    d. $5,000 loss

10. What is the entry for question 9 above:

a. Dr Cash 25,000, Dr Loss 3,000, Dr. Accumulated Depreciation 18,000 and Credit Truck 40,000

b. Dr Cash 25,000, Dr Loss 5,000, Dr. Accumulated Depreciation 20,000 and Credit Truck 40,000

c. Dr Cash 25,000, Cr Gain 3,000, Dr. Accumulated Depreciation 18,000 and Credit Truck 40,000

d. Dr Cash 25,000, Cr Gain 5,000, Dr. Accumulated Depreciation 20,000 and Credit Truck 40,000

11. All of the following are true statements concerning intangible assets, except

a. intangible assets are either purchased or created.

b. there is no accumulated depreciation account.

c. intangible assets are amortized on a straight-line basis

d. a business has physical control over intangible assets.

Answer 1

	8)	option a
		the book value from the cash received
	9)	(40000-4000)/4
		9000
		original cost				40,000
		Accumulated depreciation				-18000
		book value				22,000
		less cash received				25,000
		gain on sale				3,000
		option c
		3,000 gain
	10)	option c
		Dr cash 25,000 CR gain 3,000 Dr accumulated depereciation
		18,000 and credit Truck 40,000
	11)	option b
		there is no accumulated depreciation account