D) a debit to gain on Sale of Asset
The transaction is going to be between Accumulated Depreciation account and Gain on Sale of Asset. The Depreciation account would be credited whiles the Gain on Asset account is Debited.
Explanation:
Cost = $52,000
Estimated useful life = 7 years
Residual value = $3,000
Depreciation for each year
($52,000 -$3,000) / 7 years = $7,000
Accumulated Depreciation as at year 6
<em>$7,000 * 6 years = $42,000</em>
Carrying amount as at the end of year 6 is
<em>$52,000 - $42,000 = $10,000</em>
Sales price is $14,000.
Profit or loss on sale
(sales price - carrying amount)
<em>$14,000 - $10,000 = $4,000</em>
Therefore the profit/gain on sale of asset of $4,000 will be debited in the gain on sale of asset account.
