Which of the following statements is correct with respect to the sale of a depreciable asset? Multiple Choice A gain occurs when the selling price exceeds book value. A sale for a loss results in an increase in total assets. A sale for a gain results in a decrease in total assets. A loss occurs when the selling price is more than book value.

Question

Business

Saul Grimes

16 November, 14:03

Which of the following statements is correct with respect to the sale of a depreciable asset? Multiple Choice A gain occurs when the selling price exceeds book value. A sale for a loss results in an increase in total assets. A sale for a gain results in a decrease in total assets. A loss occurs when the selling price is more than book value.

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Answers (1)

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Edward Meza · Answer 1

A gain occurs when the selling price exceeds book value

Explanation:

When an asset depreciates, the loss of value of the asset is reflected in the book value.

For example, if a car has a useful life of four years, by the third year, it will have depreciated by 75%, or in other words, it will have lost 75% of its original value.

For this reason, if the firm manages to sell the depreciable asset for a higher value than its book value, the firm will made a net gain on the asset, because it is earning more from the sale than the value it had stored in the form of the depreciable asset.