Which Of The Following Situations Will Result In Recognizing A Gain On Sale Of A Plant Asset?
If you're studying accounting, one common exam question is identifying when a gain is recognized on the sale of a plant asset . Understanding the relationship between book value and selling price makes answering these questions much easier. Question Which of the following situations will result in recognizing a gain on the sale of a plant asset? A. A fully depreciated asset is sold for $1,000 . B. An asset with a book value of $2,000 is sold for $1,500 . C. An asset with a book value of $2,000 is sold for $2,000 . D. A fully depreciated asset is discarded. E. An asset that cost $5,000 with accumulated depreciation of $3,000 is sold for $1,500 . Correct Answer: A. A Fully Depreciated Asset Is Sold for $1,000 A gain on the sale of a plant asset occurs when the selling price exceeds the asset's book value . Formula Book Value = Cost − Accumulated Depreciation Gain (or Loss) = Selling Price − Book Value Since a fully depreciated asset has accumulated depreciation e...