Albatross Services Scrapped a Van

question 131

Multiple Choice

Albatross Services scrapped a van.The van originally cost $40,000,had an estimated salvage value of zero,and an estimated life of 10 years.At the time it was scrapped,it was fully depreciated.What was the effect of scrapping the van?

• A) Gain of $2,000
• B) No gain or loss
• C) Loss of $1,000
• D) Loss of $2,000

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Definitions:

Frustration of Contract

A legal doctrine that permits the termination of a contract when an unforeseen event renders contractual obligations impossible, or radically changes the party's principal purpose for entering into the contract.

Complications

Problems or difficulties that arise which make a situation harder to deal with or resolve.

Prudent Businessperson

An individual who exercises care, diligence, and wisdom in making business decisions, similarly to how a reasonable person would act under comparable circumstances.

Specific Performance

A legal remedy requiring a party to perform a specific act, often the completion of a contract, rather than paying damages for non-performance.