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4 February, 17:00

A company sells a plant asset that originally

cost $528000 for $194000 on December

31, 2017. The accumulated depreciation

account had a balance of $264000 after

the current year's depreciation of $44000

had been recorded. The company should

recognize a

+1
Answers (1)
  1. 4 February, 19:37
    0
    The company should recognize a loss of $70,000

    Explanation:

    Here in this question, we shall be evaluating what should be recognized in the transaction books of the company as a result of the sales of one of its plant asset.

    The first thing to do here is to calculate the book value of the plant asset.

    Mathematically, the book value of the plant asset = Original cost of plant asset - Accumulated depreciation value

    from the question; the original cost is $528,000

    while the depreciation value is $264,000

    Thus, the book value of the plant asset = $528,000 - $264,000 = $264,000

    Now since the company sold the plant asset at a value of $194,000, which is less than the book value of the plant asset, the company should recognize a loss

    The amount of the loss = Amount at which the sold - book value of the plant asset

    = 194,000 - 264,000 = - 70,000

    Thus the company should recognize a loss of $70,000
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