CFA Level I · CFA Level I Exam · Analysis of Long-Term Assets
Aldrin Co. sold a machine for 45,000 cash. The machine originally cost 120,000 and had accumulated depreciation of 90,000 at the date of sale. The result of the sale is most likely:
The sale produces a gain of 15,000. The carrying amount is cost of 120,000 less accumulated depreciation of 90,000, which is 30,000, and the proceeds of 45,000 exceed this by 15,000, which is recognised in profit or loss.
- Aa loss of 30,000
- Ba gain of 15,000Correct
- Ca gain of 45,000
Explanation
Carrying amount = 120,000 - 90,000 = 30,000. Gain = 45,000 - 30,000 = 15,000. A loss of 30,000 wrongly treats the carrying amount as the loss, and a 45,000 gain ignores the carrying amount.
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