An Asset Was Acquired on August 1, 2018, for $22,000

question 177

Multiple Choice

An asset was acquired on August 1, 2018, for $22,000 with an estimated 5-year life and $2,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on April 30, 2020, for $13,000. Partial-year depreciation is calculated based on the number of months the asset is in service.

• A) $3,000 gain.
• B) $2,000 loss.
• C) $6,000 gain.
• D) $4,000 loss.

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Definitions:

Debit Postings

Entries made on the left side of a ledger account, indicating an increase in assets or expenses or a decrease in liabilities, equity, or revenue.

Account Balance

An account balance refers to the amount of money held in a financial repository, typically a bank account, at any given moment.

Painting Equipment

Assets used in the operation of a painting business or for painting activities, classified as long-term if they provide benefits over multiple periods.

Accounts Payable

The balance of money owed to suppliers for goods or services purchased on credit and not yet paid.