An Asset Was Purchased for $12,000

question 120

Multiple Choice

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $4,500 at the end of the third year?

• A) $1,500 gain
• B) $2,000 loss
• C) No gain or loss
• D) $1,500 loss

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Definitions:

Express Warranties

Express Warranties are explicit guarantees made by a seller about the quality, condition, or performance of a product, which become part of the sales contract.

Assignment

The transfer of rights or property from one party to another.

Agreement

A mutual understanding or arrangement, typically formalized by a contract, between two or more parties.

Substantial Performance

In contract law, the situation that results when a party to a contract, in good faith, executes all the promised terms and conditions of the contract with the exception of minor details that do not affect the real intent of their agreement.