Dana Purchases an Automobile for Personal Use for $27,000

question 74

Multiple Choice

Dana purchases an automobile for personal use for $27,000. After using it for three years, Dana converts the automobile to business use when the fair market value is $19,000. After a few months of business use, Dana sells the automobile for $18,000. What is the amount of gain or loss recognized on the sale of the automobile?

• A)No gain or loss
• B)$1,000 loss
• C)$8,000 loss
• D)$9,000 loss
• E)$8,000 gain

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Definitions:

Job-Order Costing

An accounting method that assigns costs to specific batches or job orders, tracking the expenses of each job separately.

T-Account

This is an informal term for a ledger account that depicts the credit and debit sides of transactions, used in accounting to organize financial data.

Work in Process

Inventory that includes goods partially completed but not yet ready for sale.

Predetermined Overhead Rate

The rate used to allocate estimated overhead costs to products or job orders, based on a preselected activity base.