Asked by Libby Marie on May 08, 2024
Verified
A company discarded a computer system originally purchased for $18,000.The accumulated depreciation was $17,200.The company should recognize a(an) :
A) $0 gain or loss.
B) $800 loss.
C) $800 gain.
D) $8,000 loss.
E) $7,200 loss.
Accumulated Depreciation
The total amount of depreciation expense that has been recorded against a fixed asset from the time of its acquisition until a specified reporting date.
Original Cost
The purchase price of an asset or service, excluding any subsequent costs for maintenance or improvement.
- Learn the technique for recording the increase or decrease in value following the disposal of assets.
Verified Answer
SP
Sharma PratimaMay 14, 2024
Final Answer :
B
Explanation :
To determine the gain or loss on the disposal of the computer system, we need to compare the accumulated depreciation to the original cost.
Original cost = $18,000
Accumulated depreciation = $17,200
Therefore, the net book value (NBV) of the asset is:
NBV = $18,000 - $17,200 = $800
Since the company discarded the asset, we can assume that they received $0 in cash or other assets in exchange for the system. Therefore, the gain or loss on disposal is simply the NBV of the asset. In this case, since the NBV is positive, there is a loss of $800. The answer is B.
Original cost = $18,000
Accumulated depreciation = $17,200
Therefore, the net book value (NBV) of the asset is:
NBV = $18,000 - $17,200 = $800
Since the company discarded the asset, we can assume that they received $0 in cash or other assets in exchange for the system. Therefore, the gain or loss on disposal is simply the NBV of the asset. In this case, since the NBV is positive, there is a loss of $800. The answer is B.
Learning Objectives
- Learn the technique for recording the increase or decrease in value following the disposal of assets.