Gupta Company Made the Following Sales of Capital Assets This

question 72

Multiple Choice

Gupta Company made the following sales of capital assets this year. $$\begin{array} { c c c } & \text { Tax Basis } & \text { Sale Price } \\\text { Asset 1 } & \$ 60,000 & \$ 47,800 \\\text { Asset 2 } & 112,500 & 116,000 \\\text { Asset } 3 & 13,000 & 22,400\end{array}$$ What is the effect of the three sales on Gupta's taxable income?

• A) $700 increase
• B) $12,900 increase
• C) No effect
• D) None of the above

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual installments.

Salvage Value

The anticipated value left in an asset at the conclusion of its serviceable life, employed in the depreciation calculation.

Useful Life

The estimated period during which an asset is expected to be usable for its intended purpose, affecting its depreciation calculation.

Journal Entries

The recordation of a transaction in an accounting journal that impacts at least two accounts, indicating the debit and credit amounts.