A company purchased a computer that cost $10,000. It had an estimated useful life of five years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. The company should record:
A) a loss of $1,000.
B) a gain of $1,000.
C) neither a gain nor a loss—the computer was sold at its book value.
D) neither a gain nor a loss—the gain that occurred in this case would not be recognized.
Answer: A
A company purchased a computer that cost $10,000. It had an estimated useful life of five years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. The company should record:
A) a gain of $1,000.
B) a loss of $1,000.
C) neither a gain nor a loss—the computer was sold at its book value.
D) neither a gain nor a loss—the gain that occurred in this case would not be recognized.
Answer: A
Equipment was sold for $40,000. The equipment was originally purchased for $75,000. At the time of the sale, the equipment had accumulated depreciation of $50,000. Calculate the gain or loss to be recorded on the sale of equipment.
A) Gain of $10,000.
B) Loss of $15,000.
C) Loss of $35,000.
D) Gain of $15,000.
Answer: D
