Jantzi Company reported capital assets, net of accumulated depreciation, on January 1, 2020, at $427,500 and $579,300 on December 31, 2020. The income statement showed depreciation of
$38,700. Jantzi Company acquired $275,000 of capital assets during the year and reported proceeds from the sale of capital assets of $89,200 for the year. The gain or loss resulting from the sale of capital assets was:
A) $3,400 loss
B) $4,700 gain
C) $5,050 gain
D) $2,390 loss

Question

Quizplus · Accepted Answer

To calculate the gain or loss from the sale of capital assets, we first determine the book value of the assets sold. The change in net capital assets is calculated as the ending balance minus the beginning balance, plus depreciation, minus acquisitions. This equals $579,300 - $427,500 + $38,700 - $275,000 = -$84,500. This negative number represents the decrease in net capital assets not explained by acquisitions and depreciation, which is due to sales. Since the proceeds from the sale were $89,200, and the decrease in net capital assets (attributable to sales) is $84,500, the difference of $4,700 is the gain on the sale of the capital assets.

Jantzi Company Reported Capital Assets, Net of Accumulated Depreciation, on January