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A truck cost $35,000 with Accumulated Depreciation of $28,000 is sold for $7,000 cash. What is the result of the sale?
AA reported gain of $7,000 on the sale
BA reported loss of $7,000 on the sale
CA reported gain of $3,000 on the sale
DBreakeven, with no gain or loss reported
Answer & Solution
Correct answer: D. Breakeven, with no gain or loss reported
1. Carrying amount $= \$35{,}000 - \$28{,}000 = \$7{,}000$.
2. Cash received = $7,000.
3. Proceeds equal carrying amount.
4. With proceeds equal to carrying amount the company breaks even, so no gain or loss is recorded.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.7.1 "Selling a Fixed Asset (breakeven)", p.165_
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