Question

A plant asset with a cost of $360,000 and accumulated depreciation of $342,000 is sold for $42,000. What is the amount of the gain or loss on disposal of the plant asset?

a. $42,000 loss.
b. $24,000 loss.
c. $24,000 gain.
d. $42,000 gain.

Answer 1

The gain on disposal of the asset is calculated by subtracting the book value of the asset from its sale price. The book value is the cost less accumulated depreciation. In this case, there is a gain of $24,000.

Step-by-step explanation:

The student asked about the amount of gain or loss on disposal of a plant asset. The asset had a cost of $360,000 and an accumulated depreciation of $342,000 and was sold for $42,000.

To calculate the gain or loss, we subtract the asset's book value (cost minus accumulated depreciation) from the sale price. So, the book value is $360,000 - $342,000 = $18,000. Subtracting this from the sale price of $42,000, we get $42,000 - $18,000 = $24,000. Since the sale price is higher than the book value, this amount represents a gain.

Therefore, the correct answer is c. $24,000 gain.