Question

A certain firm sell its restaurant equipment for $5,000. Its original cost was $20,000 and its accumulated depreciation to the date of sale is $14,000. The result of this sale is a:

1) $1000 loss
2) $5000 loss
3) $1000 gain
4) $5000 gain

Answer 1

The result of the sale is a $1,000 loss, calculated by subtracting the book value of the equipment ($6,000) from the sale price ($5,000).

Step-by-step explanation:

The question involves determining the result of a sale of restaurant equipment from an accounting perspective. To calculate the gain or loss from the sale of an asset, one must subtract the asset's book value (original cost minus accumulated depreciation) from the sale price. In this case, the original cost of the restaurant equipment was $20,000 and the accumulated depreciation is $14,000, which gives us a book value of $6,000 ($20,000 - $14,000). The equipment was sold for $5,000. Therefore, the sale results in a loss of $1,000 ($5,000 sale price - $6,000 book value).