An assets book value is 19800 on December 31 Year 5 The asse

An assets book value is $19,800 on December 31, Year 5. The asset has been depreclated at an annual rate of $4,800 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $16,800, the company should record: Multiple Choice Neither a gain nor loss is recognized on this type of transaction. A loss on sale of $3,000. A gain on sale of $3,000. A gain on sale of $4,200. K Prev 1 of 25Next> Next >

Solution

Answer to question 1:

Given information:

1.Year5 December 31 book value = $19800

2.Year 5 December 31 sale value = $ 16800

Gain/(loss) = Sale value - Book value

= $16800 - $19800

= ($3000)

Therefore, answer is option b: loss on sale of $3000

Answer to question 2

Given information :

Purchase price : $192000

Real estate commission : $16700

Legal fees : $2500

Expenses for clearing the land : $3700

Expenses to remove old building : $2700

Cost allocated to land = Purchase price + Real estate commission

= $192000+$16700

= $208700

Cost allocated to building = Legal fees + Expenses for clearing the land + Expenses to remove old building

= $2500 + $ 3700 + $ 2700

= $8900

Option b : $208700 to land and $8900 to building.