- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 26. Long-lived Assets
- Subject 6. Derecognition
CFA Practice Question
On June 28, 2015, a business sold a plant asset that cost $5,000 for $1,500. The asset had a 5-year service life, no salvage value, and had been used by the business since January 1, 2012. Straight-line depreciation was used. The fiscal year ends on December 31. What will be the result of selling the plant asset?
A. A $500 gain on the disposal of the plant asset
B. A $500 loss on the disposal of the plant asset
C. No gain or loss on the disposal of the plant asset
Explanation: The annual depreciation was $1,000 ($5,000 / 5). The book value on June 28 was $1,500 ($5,000 - ($1,000 X 3) - ($1,000 X 1/2)). The sales price was equal to the book value; there was no gain or loss.
User Contributed Comments 5
| User | Comment |
|---|---|
| awlhoaln | must count half dep on jun 01? |
| najat | For 2 days left, I guess you can count it as half a year |
| Mikehuynh | Book value = selling price => record no gain/loss |
| dbalakos | nice, thats why we got to pay attention!! |
| mali97 | hate that u said fiscal year ends on Dec 31. I thought you dont count half the year because of that |