Question

A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an):

Answer 1

The company should recognize a $800 loss.

Step-by-step explanation:

Depreciation is the loss of value of an asset over its useful life, and because of the accrual principle, this depreciation is matched, as an expense, with the revenues that the asset produces in a specific period of time.

In this case, the company has expensed $17,200 over the computer system useful life. When the computer system was finally discarded, $800, representing the difference between the accumulated depreciation and the original cost of the system, where not expensed. For this reason, this $800 have to be recognized as a loss.