Question

5) Clark Imports sold a depreciable plant asset for cash of $35,000. The accumulated

depreciation amounted to $70,000, and a loss of $5,000 was recognized on the sale. Under
these circumstances, the original cost of the asset must have been:

Answer 1

$110,000

Step-by-step explanation:

For depreciation, a loss or gain is realized by subtracting the selling price from the book value. Accumulated depreciation is the total amount that has been deducted as depreciation amount.

I.e., profit or loss = selling price - book value

In this case, a loss of $5000 was realized, the selling price was $35,000. The book value must have been $40,000.

$35,000 - $40,000 = - $5,000

The original cost will be the book value + depreciation amount

=$40,000 +$70,000

=$110,000