Question

An asset that costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600. What amount of gain or loss will be recognized when the asset is sold?

Answer 1

There will be an $800 loss

Explanation:

The initial cost of the asset is $14,400

When an asset depreciates, it loses its potential value over time. In this case, the total depreciation of our asset is given as $8,000.

The Current value of the asset = Initial Value - Accumulated Depreciation

Current value = $14,400 - $8,000 = $6,400

Since the asset is sold for $5,600, it is clear that this is a loss, as the selling price of $5,600 is less than the actual price of $6,400. So,

Loss = Actual (Cost) Price - Selling Price = $6,400 - $5,600 = $800