A company sells a long-lived asset that originally cost $200,000 for $50,000 on December 31,2009.The accumulated amortization account had a balance of $110,000 after the current year's depreciation of $45,000 had been recorded.The company should recognize a:
A)$100,000 loss on disposal.
B)$40,000 gain on disposal.
C)$40,000 loss on disposal.
D)$25,000 loss on disposal.

Question

Quizplus · Accepted Answer

The book value of the asset can be calculated as follows:

Original cost - Accumulated depreciation = Book value
$200,000 - $110,000 = $90,000

Since the asset was sold for $50,000, the company incurred a loss on disposal.

Loss on disposal = Book value - Sale price
Loss on disposal = $90,000 - $50,000
Loss on disposal = $40,000

Therefore, the correct answer is C, a $40,000 loss on disposal.

A Company Sells a Long-Lived Asset That Originally Cost $200,000