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GenaCL600 [577]
3 years ago
11

. Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2013 for $2,000,000. D

epreciation deductions of $1,200,000 have been taken up to the time of sale. What amount and character of gain will Dallas report from the sale of this asset?
Business
1 answer:
olga2289 [7]3 years ago
5 0

Answer:

$2,200,000 gain

Explanation:

When the amount received from the disposal of an asset is lower than the carrying or net book value (NBV) of the asset, the company makes a loss on disposal otherwise, the company makes a gain on disposal.

The carrying amount of the asset is the difference between the asset's cost and accumulated depreciation as at the date of disposal.

Asset NBV = $2,000,000 - $1,200,000

= $800,000

Gain/(loss) on disposal = $3,000,000 - $800,000

= $2,200,000

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