Question

A company sells a plant asset which originally cost $360,000 for $120,000 on December 31, 2015. The Accumulated Depreciation account had a balance of $144,000 after the current year's depreciation of $36,000 had been recorded. The company should recognize a A. $60,000 loss on disposal. B. $96,000 loss on disposal. C. $240,000 loss on disposal. D. $96,000 gain on disposal.

Answer 1

Answer:

96,000 loss on disposal

Explanation:

Data provided:

The cost of plant assets = $ 360,000

Selling value of the plant assets = $ 120,000

Accumulated Depreciation = $ 144,000

Therefore,

the net book value of the plant assets = Total cost of the plant - the depreciation

or

the net book value of the plant assets = $ 360,000  - $ 144,000  = $216,000

since, the net book value is more than the selling price

Therefore, the loss on disposal = Book value - selling cost

= $216,000  - $ 120,000

or

the loss = $ 96,000

hence, the option B is the correct answer i.e $ 96,000 loss on disposal