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When an asset is sold, how is the gain or loss on sale calculated?

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Question: When an asset is sold, how is the gain or loss on sale calculated?

Options:

  1. Sale price minus book value
  2. Book value minus sale price
  3. Sale price minus original cost
  4. Original cost minus book value

Correct Answer: Sale price minus book value

Solution: 

The gain or loss on sale of an asset is calculated as the sale price minus the book value of the asset at the time of sale.

When an asset is sold, how is the gain or loss on sale calculated?

Practice Questions

Q1
When an asset is sold, how is the gain or loss on sale calculated?
  1. Sale price minus book value
  2. Book value minus sale price
  3. Sale price minus original cost
  4. Original cost minus book value

Questions & Step-by-Step Solutions

When an asset is sold, how is the gain or loss on sale calculated?
  • Step 1: Determine the sale price of the asset. This is the amount you received when you sold it.
  • Step 2: Find the book value of the asset. This is the value of the asset recorded in your accounting books, which may include the original purchase price minus any depreciation.
  • Step 3: Subtract the book value from the sale price. If the result is positive, you have a gain. If it is negative, you have a loss.
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