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A truck cost $35,000 with Accumulated Depreciation of $28,000 is sold for $5,000 cash. What gain or loss results on the sale?
AGain of $3,000
BLoss of $2,000
CLoss of $5,000
DNo gain or loss
Answer & Solution
Correct answer: B. Loss of $2,000
1. Carrying amount $= \$35{,}000 - \$28{,}000 = \$7{,}000$.
2. Cash received = $5,000.
3. Proceeds are less than carrying amount, so there is a loss.
4. Loss $= \$7{,}000 - \$5{,}000 = \$2{,}000$.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.7.1 "Selling a Fixed Asset (loss)", p.165_
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