Question

An asset's book value is $19,800 on december 31, year 5. assuming the asset is sold on december 31, year 5 for $13,200, the company should record:

a. a gain on sale of $12,600.
b. a loss on sale of $12,600.
c. neither a gain nor a loss is recognized on this transaction.
d. a loss on sale of $6,600.
e. a gain on sale of $6,600.

Answer 1

The company should record a loss on sale of $6,600 (option d), which is calculated by subtracting the sale price of $13,200 from the book value of $19,800.

Step-by-step explanation:

The question is related to the accounting treatment of the disposal of an asset and the resulting gain or loss on sale. When an asset is sold, the gain or loss is calculated by comparing the sale price to the asset's book value.



In this scenario, the asset has a book value of $19,800 and is sold for $13,200. Therefore, the company should recognize a loss on sale of the asset, which is the difference between the book value and the sale price.

To calculate the loss, we subtract the sale price from the book value:

Book Value: $19,800

Sale Price: $13,200

Loss on sale: $19,800 - $13,200 = $6,600

The correct answer is D. a loss on sale of $6,600.