When accounting for the disposal of fixed assets, the gain or loss on disposal is equal to…?

When accounting for the disposal of fixed assets, the gain or loss on disposal is equal to…?
A . The difference between resale price and the cost or valuation less accumulated depreciation up to the date of disposal
B . The difference between resale price and the cost of that asset
C . The difference between resale price and the cost or valuation plus depreciation up to the beginning of the year in which disposal took place
D . The difference between resale price and the cost of the asset less depreciation up to the beginning of the year in which disposal took place

View Answer

Answer: A

Explanation:

When accounting for the disposal of fixed assets, the gain or loss is calculated as the difference between the resale price and the book value of the asset at the time of disposal. The book value is calculated as the original cost or valuation of the asset minus the accumulated depreciation up to the date of disposal. This gives the most accurate representation of the asset’s value at the time of disposal, allowing for a precise calculation of the gain or loss on the disposal.

Option B does not consider depreciation, which is a crucial factor in determining the book value of the asset at the time of disposal.

Option C adds the depreciation to the cost or valuation, which is not the correct method for calculating the book value at the time of disposal.

Option D considers depreciation only up to the beginning of the year in which disposal took place, which may not give an accurate book value at the time of disposal as it does not account for depreciation incurred during the year of disposal.

Therefore, option A is the most accurate and correct choice for calculating the gain or loss on disposal of fixed assets.