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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Jerabek Inc. decided to sell one of its fixed assets that had a cost of $55,000 and accumulated depreciation of $35,000 on July 1, 2019. On that date, Jerabek sold the fixed asset for $15,000. What was the resulting gain or loss from the sale of the asset?

a. $5,000 loss

b. $5,000 gain

c. $15,000 loss

d. $15,000 gain

To determine

Depreciation:

The depreciation is the expense which is debited to the income statement in the ratio of the period of the respective asset.

Accumulated Depreciation:

The accumulated depreciation is the account which is created to record the depreciation expense from the asset purchase time till the disposal time.

To select:

The correct resulting gain or loss from the sale of asset.

Explanation

The Jerabek Inc. acquired a machine with the following information:

Purchase Cost=$55,000Accumulated Depreciation=$35,000Sale of Asset=$15,000

When any asset is sold for an amount which is more than the book value then it is considered to be at profit and when any asset is sold for an amount which is less than the book value then it is considered to be at loss.

Book Value=CostAccumulated Depreciation

Now, computation of new depreciation is as follows:

Particulars Amount ($

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