Question

When a company reports a loss on the sale of a depreciable asset, which of the following is always true? Multiple Choice
a. The company sold the asset for less than book value.
b. The company sold the asset before the useful life was over.
c. The company sold the asset for less than accumulated depreciation.
d. The company sold the asset for less than fair value.

Answer 1

Answer: A - The company sold the asset for less than book value.

Explanation: A loss on the sale of a depreciable asset is the negative difference between the purchase price of an asset less the total accumulated depreciation and any other charges.

This can also be described as the price a depreciable asset is sold which is less than the Net book Value of the asset in the books of the company.