Equipment That Cost $420,000 and on Which $200,000 of Accumulated

question 92

Multiple Choice

Equipment that cost $420,000 and on which $200,000 of accumulated depreciation had been recorded was sold for $180,000 cash.The entry to record this transaction would include a

• A)gain of $40,000.
• B)loss of $40,000.
• C)credit to the Equipment account for $220,000.
• D)credit to Accumulated Depreciation for $200,000.

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Definitions:

Temporary Difference

A discrepancy between the carrying amount of an asset or liability in the balance sheet and its tax base, creating taxable or deductible amounts in the future.

Straight-Line Depreciation

A technique for distributing the cost of an asset uniformly over its lifespan.

Capital Cost Allowance

Capital Cost Allowance is a tax deduction in some jurisdictions that represents depreciation for tax purposes, allowing businesses to deduct the cost of certain assets over a period.

Deferred Tax

A tax obligation or asset that results from temporary differences due to the different timing of recognition of income and expenses for tax and accounting purposes.