A financial analyst at BETTO, S.A. is analyzing the result of the sale of a vehicle for85,000 Argentine pesos (ARP) on 31 December 2009. Th e analyst compiles the followinginformation about the vehicle:Acquisition cost of the vehicle ARP 100,000Acquisition date 1 January 2007Estimated residual value at acquisition date ARP 10,000Expected useful life 9 yearsDepreciation method Straight-lineTh e result of the sale of the vehicle is most likely:A. a loss of ARP 15,000.B. a gain of ARP 15,000.C. a gain of ARP 18,333.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A financial analyst at BETTO, S.A. is analyzing the result of the sale of a vehicle for
85,000 Argentine pesos (ARP) on 31 December 2009. Th e analyst compiles the following
information about the vehicle:
Acquisition cost of the vehicle ARP 100,000
Acquisition date 1 January 2007
Estimated residual value at acquisition date ARP 10,000
Expected useful life 9 years
Depreciation method Straight-line
Th e result of the sale of the vehicle is most likely:
A. a loss of ARP 15,000.
B. a gain of ARP 15,000.
C. a gain of ARP 18,333.
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