Question

Question 5
A company has a building that it originally bought for $500,000. As of 9/9/2012, there is $100,000 of Accumulated Depreciation on the building. On 9/9/2012, the company sells the building for $420,000.

How will this transaction show up on the income statement?


Gain on sale of Building of $80,000



Loss on sale of Building of $80,000



Gain on sale of Building of $20,000



It will not affect the income statement



Loss on sale of Building of $20,000


1 point
6.
Question 6
Which of the following assets w

Answer 1

To determine how the sale of the building will affect the income statement, we need to calculate the book value of the building at the time of the sale and compare it to the sale price.

1. **Original Cost of the Building**: $500,000
2. **Accumulated Depreciation as of 9/9/2012**: $100,000
3. **Book Value of the Building**:
\[
\text{Book Value} = \text{Original Cost} - \text{Accumulated Depreciation} = 500,000 - 100,000 = 400,000
\]
4. **Sale Price of the Building**: $420,000

5. **Gain or Loss on Sale**:
\[
\text{Gain/Loss} = \text{Sale Price} - \text{Book Value} = 420,000 - 400,000 = 20,000
\]
Since the sale price is greater than the book value, this results in a gain.

Thus, the gain on the sale of the building is **$20,000**.

In summary, the correct answer is: **Gain on sale of Building of $20,000**.