Final answer:
The correct journal entry for selling an asset with a book value of $20,000 for $12,000 would include a debit to Loss on Disposal of Plant Assets of $8,000.
Step-by-step explanation:
When recording the sale of an asset, we compare the asset's book value (cost minus accumulated depreciation) with the sale proceeds to determine whether we realize a gain or a loss. In this case, the asset's book value is $20,000 ($80,000 cost - $60,000 accumulated depreciation), and it is sold for $12,000. Therefore, the company incurs a loss of $8,000 ($20,000 book value - $12,000 sale proceeds) on the disposal of the plant asset. The correct journal entry to record the sale would be:Debit Cash $12,000Debit Loss on Disposal of Plant Assets $8,000Credit Accumulated Depreciation $60,000Credit Plant Assets $80,000.
As a result, the correct answer is B. debit to Loss on Disposal of Plant Assets of $8,000.The journal entry to record the sale of the asset would include a debit to Accumulated Depreciation for $60,000 and a credit to the Asset Account for the original cost of the asset, which is $80,000. Since the asset was sold for $12,000, there would also be a credit to Cash or Accounts Receivable for $12,000. However, there would not be a credit to Gain on Disposal of Plant Assets or a debit to Loss on Disposal of Plant Assets in this situation.