A Fixed Asset with a Cost of $30,000 and Accumulated

question 48

Multiple Choice

A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?

• A) $2,000 loss
• B) $1,500 loss
• C) $3,500 gain
• D) $2,000 gain

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Definitions:

Allowance Method

The allowance method is an accounting approach that estimates and reports bad debts as an expense and accounts for receivables that are not expected to be collected.

Bad Debts Expense

The cost associated with accounts receivable that a company does not expect to collect because customers default on payments.

Direct Write-off Method

A method where uncollectible accounts receivable are written off directly against income at the time they are deemed to be uncollectible.

Uncollectible Accounts

Accounts receivable deemed uncollectible by a business, representing money owed by customers that is unlikely to be paid and usually written off as an expense.