If an asset costs 80000 and has accumulated depreciation of 25000, and it is sold for 60000, what is the gain or loss on the sale?

If an asset costs 80000 and has accumulated depreciation of 25000, and it is sold for 60000, what is the gain or loss on the sale?

• A. 5000 gain
• B. 15000 gain
• C. 60000 loss
• D. 25000 loss

Answer: (A)

The key idea is that gain or loss on disposal is found by comparing the sale price to the asset’s book value (cost minus accumulated depreciation). The book value here is 80,000 minus 25,000, which equals 55,000. The asset sold for 60,000, which is 5,000 more than the book value, so there is a 5,000 gain on the sale. If the sale price had been lower than 55,000, it would be a loss; if it had been exactly 55,000, there would be no gain or loss.

The key idea is that gain or loss on disposal is found by comparing the sale price to the asset’s book value (cost minus accumulated depreciation). The book value here is 80,000 minus 25,000, which equals 55,000. The asset sold for 60,000, which is 5,000 more than the book value, so there is a 5,000 gain on the sale. If the sale price had been lower than 55,000, it would be a loss; if it had been exactly 55,000, there would be no gain or loss.