A Company Sells a Long-Term Asset That Originally Cost $180,000

question 7

Multiple Choice

A company sells a long-term asset that originally cost $180,000 for $60,000 on December 31, 2008.The accumulated depreciation account had a balance of $72,000 after the current year's depreciation of $18,000 had been recorded.The company should recognize a

• A)$120,000 loss on disposal.
• B)$48,000 gain on disposal.
• C)$48,000 loss on disposal.
• D)$30,000 loss on disposal.

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Definitions:

Noncash Investing

Transactions that involve the acquisition or disposal of assets not involving immediate cash flow.

Indirect Method

A method used in cash flow statements to calculate net cash flow from operating activities by adjusting net income for changes in non-cash accounts like accounts receivable, accounts payable, and depreciation.

Current Liability

A financial obligation that is due within one year or within the normal operating cycle of the business, whichever is longer.

Indirect Method

A cash flow statement format that starts with net income and adjusts for non-cash transactions and changes in working capital to arrive at net cash provided by operating activities.