Question

A company sells a plant asset that originally cost $150,000 for $50,000 on December 31, 2007. The accumulated depreciation account had a balance of $60,000 after the current year's depreciation of $15,000 had been recorded. The company should recognize a

a. $100,000 loss on disposal.
b. $40,000 gain on disposal.
c. $40,000 loss on disposal.
d. $25,000 loss on disposal.

Answer 1

Option (C) is correct.

Step-by-step explanation:

Net book value as on 31st Dec 2007:

= Cost of Assets - Accumulated Depreciation

= $150,000 - $60,000

= $90,000

Loss from sale of asset:

= Net book value as on 31st Dec 2007 - Amount realised after sale of asset

= $90,000 - $50,000

= $40,000

Therefore, the company should recognize a $40,000 loss on disposal.