Answer the following statements true (T) or false (F)
1. When a business sells a plant asset for book value, a gain or loss should be recorded.
2. When a plant asset is sold for less than its book value, a gain is recorded.
3. If a plant asset is sold for more than its book value, a loss is recorded.
4. On July 14, Jones Sporting Goods sold equipment that originally cost $50,000. After updating depreciation, the Accumulated Depreciation - Equipment had a normal balance of $44,000. The selling price of the equipment was $42,000. Jones will report a loss of $8,000.
1. FALSE
Explanation: When a business sells a plant asset for book value, no gain or loss should be recorded.
2. FALSE
Explanation: When a plant asset is sold for less than its book value, a loss is recorded.
3. FALSE
Explanation: If a plant asset is sold for more than its book value, a gain is recorded.
4. FALSE
Explanation: Book value = Cost - Accumulated Depreciation = $50,000 - $44,000 = $6,000
Selling price $42,000 - Book value $6,000 = $36,000 Gain
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