A fixed asset with a cost of $30,000 and accumulated depreciation of $27,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?

Question

 A. $3,500 gain B. $1,000 gain C. $1,000 loss D. $2,500 loss C. $3,500 loss D. $2,500 gain

Answer 1

The Book Value is Calculated as Follows:

Book Value = Original Cost of Equipment - Accumulated Depreciation

Cost : 30,000

Accumulated Depreciation: 27.500

Book Value = 30,000 - 27,500 = 2,500

Sale of Equipment: 3,500

Book Value: 2,500

Sale Price > Book Value, therefore a gain is reported of 1,000 (3,500 - 2,500).

Answer 2

Cost $30,000

Acc Depn $27,500

Net Book Value $2,500

Sale proceeds $3,500

Gain on sale $1,000

Correct answer is B.