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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

A machine that cost $100 and had accumulated depreciation of $80 was sold for $20.

  1. (a) There was a $20 gain.
  2. (b) There was a $20 loss.
  3. (c) There was no gain or loss.
  4. (d) There was a $60 loss.

To determine

Find the correct option that indicates the correct output for the given transaction.

Explanation

Long-term assets: The assets which are used to generate revenue for the business operations for a number of accounting periods are referred to as long-term assets or plant assets.

Gain or loss on sale: Gain on sale is the amount realized on sale transaction, when the sale proceeds are more than the book value of the asset on the date of sale. Loss on sale is the amount realized on sale transaction, when the sale proceeds are less than the book value of the asset on the date of sale. Book value is the amount of acquisition cost of less accumulated depreciation as on date of disposal.

Determine the gain or loss on sale of machine.

Step 1: Compute book value on the date of sale...

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