Carter Company Disposed of an Asset at the End of the Eighth

question 62

Multiple Choice

Carter Company disposed of an asset at the end of the eighth year of its estimated life for $10,000 cash.The asset's life was originally estimated to be 10 years.The original cost was $50,000 with an estimated residual value of $5,000.The asset was being depreciated using the straight-line method.What was the gain or loss on the disposal?

• A)$1,000 loss.
• B)$4,000 loss.
• C)$5,500 gain.
• D)$10,000 gain.

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Definitions:

Selling Price

The amount of money charged for a product or service, or the sum for which something is sold.

Margin of Safety

The difference between actual sales and the break-even point, indicating how much sales can fall before a business incurs a loss.

Fixed Expenses

Costs that do not vary with the level of production or sales, remaining constant over a period of time.

Variable Expenses

Charges that adjust directly with the volume of production or sales, encompassing costs related to raw materials and direct labor.