An asset that cost $24,000 and has accumulated depreciation of $18,000 is sold for $5,200.The entry to record the sale is:
A) Accumulated Depreciation- Asset 6,000
Asset 6,000
B) Cash 5,200
Accumulated Depreciation- Asset 18,000
Loss on Sale of Asset 800
Asset 24,000
C) Loss on Sale of Asset 18,800
Asset 18,800
D) Asset 18,000
Accumulated Depreciation- Asset 18,000

Question

Quizplus · Accepted Answer

The sale of an asset involves three accounts: Cash, Accumulated Depreciation-Asset, and the Asset account itself. The cost of the asset is $24,000, and the accumulated depreciation is $18,000. Therefore, the book value of the asset is $6,000 ($24,000 - $18,000). The cash received from the sale of the asset is $5,200, which is less than the book value ($6,000). As a result, a loss must be recognized. The loss on the sale of the asset is the difference between the cash received ($5,200) and the book value of the asset ($6,000), which is $800. Therefore, the correct entry to record the sale is:
    Cash                       5,200
    Accum. Depr. - Asset 18,000
    Loss on Sale of Asset      800
    Asset                       24,000
This entry records the cash received, removes the accumulated depreciation related to the asset, recognizes the loss on the sale of the asset, and removes the asset itself from the books.

An Asset That Cost $24,000 and Has Accumulated Depreciation of $18,000