An Asset's Book Value Is $36,000 on January 1,Year 6

question 116

Multiple Choice

An asset's book value is $36,000 on January 1,Year 6.The asset is being depreciated $500 per month using the straight-line method.Assuming the asset is sold on July 1,Year 7 for $25,000,the company should record:

• A)Neither a gain or loss is recognized on this type of transaction.
• B)A gain on sale of $2,000.
• C)A loss on sale of $1,000.
• D)A gain on sale of $1,000.
• E)A loss on sale of $2,000.

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Definitions:

Economic Life

The expected period during which an asset remains useful to the average owner.

Face Value

The nominal or dollar value printed on a financial instrument, such as a bond or stock certificate.

Required Return

The minimum profit or yield that investors expect or require from an investment.

Interest

The cost of borrowing money or the income earned from lending money, usually expressed as a percentage of the principal.