On September 1,2012,Algernon Company Sold a Truck for $15,000 Cash

question 143

Multiple Choice

On September 1,2012,Algernon Company sold a truck for $15,000 cash.The truck was originally purchased for $40,000,had an estimated salvage value of $4,000 and an estimated life of 6 years.Algernon had recorded depreciation of $30,000 through the end of 2011 using Straight-Line.First,Algernon had to update the depreciation prior to sale.Then Algernon recorded the sale transaction.What was the effect of that transaction on the net income of the company?

• A) No gain or loss
• B) Gain of $9,000
• C) Gain of $15,000
• D) Loss of $9,000

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Definitions:

T-bill Rate

The yield or interest rate paid to investors of U.S. Treasury bills, short-term debt instruments issued by the U.S. government.

Stock Price

The current market price at which a share of a company's stock can be bought or sold.

Black-Scholes Value

A model used to estimate the theoretical price of options and certain other financial instruments.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other assets at a specified price within a specific time period.