Abbott Company Purchased a Computer That Cost $10,000

question 142

Multiple Choice

Abbott Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. Abbott should record:

• A) a gain of $1,000.
• B) a loss of $1,000.
• C) neither a gain nor a loss - the computer was sold at its book value.
• D) neither a gain nor a loss - the gain that occurred in this case would not be recognizeD.$10,000/5 = depreciation of $2,000 per year. After four years, the book value would be $10,000 - ($2,000 x 4 years) = $2,000. The asset was sold for $3,000 or a $1,000 gain over book value.

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Definitions:

Government Functions

Activities and roles undertaken by government entities, including legislating, regulating, taxation, and providing public goods and services.

Special-Interest Effect

The impact or influence of special interest groups on policy-making processes, often aimed at obtaining favorable regulations or benefits for their members.

Economic Losses

The reduction in economic value due to factors such as poor investment decisions, natural disasters, or inadequate demand for goods and services.

Economic Gains

Increases in wealth or resources, often measured in terms of profit or improved well-being resulting from economic activities.