When a Plant Asset is Sold for More than its Book Value

B

Gain or loss on disposal of a fixed asset is calculated by subtracting the book value (Original cost - Accumulated Depreciation) from the cash received.

When a plant asset is sold for more than its book value, it means that the selling price exceeds the net carrying value of the asset on the company's books. The net carrying value is calculated by subtracting the accumulated depreciation from the original cost of the asset.

Let's go through each answer choice and analyze it:

A. cash received plus accumulated depreciation plus gain on disposal equals the original cost.

This answer choice is incorrect because it states that the cash received, accumulated depreciation, and gain on disposal should add up to the original cost. However, the gain on disposal should not be included in this calculation. The gain on disposal represents the excess of the selling price over the book value and should be treated separately.

B. cash received plus accumulated depreciation minus gain on disposal equals the original cost.

This answer choice is also incorrect because it subtracts the gain on disposal from the accumulated depreciation, which is incorrect. The gain on disposal is not related to the accumulated depreciation and should be treated separately.

C. book value of the asset minus gain on disposal equals cash received.

This answer choice is correct. The book value of the asset is the net carrying value, which is the original cost minus the accumulated depreciation. When the asset is sold for more than its book value, the gain on disposal is calculated as the difference between the selling price and the book value. Therefore, the cash received would be equal to the book value minus the gain on disposal.

D. original cost minus accumulated depreciation equals cash received plus gain on disposal.

This answer choice is incorrect because it adds the gain on disposal to the cash received, which is incorrect. The gain on disposal is not added to the cash received but rather represents the difference between the selling price and the book value.

In conclusion, the correct answer is C. The book value of the asset minus the gain on disposal equals the cash received.