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 the disposal of the fixed asset?

A. $3,500 gain

B. $1,000 gain

C. $1,000 loss

D. $2,500 loss

C. $3,500 loss

D. $2,500 gain

The correct answer is B that is gain of $1,000

Explanation:

The amount of gain or loss on the disposal of the fixed assets is computed as:

Amount of loss or gain = (Selling Price + Accumulated depreciation) - Cost of fixed assets

where

Selling Price is $27,500

Accumulated depreciation is $3,500

Cost of fixed assets is $30,000

Putting the values above:

= ($27,500 + $3,500) - $30,000

= $31,000 - $30,000

= $1,000

It is a gain of $1,000 on disposal of the fixed assets.