TP owns and operates a resort hotel in a small town. As a courtesy to his custom

Question

TP owns and operates a resort hotel in a small town. As a courtesy to his customers, TP owns a passenger van which he uses to pick-up and deliver customers to and from the local airport. TP purchased the passenger van for $50,000 several years ago.

This year, TP sold the passenger van for $20,000 so he could purchase a brand new larger van. At the time of the sale, TP had claimed $42,500 as depreciation deductions attributable to the passenger van.

How much gain or loss did TP recognize on the sale of the passenger van?

Select one:

A. $12,500

B. $22,500

C. $30,000

D. $42,500

Explanation / Answer

Answer is A. $12,500

Sale value of Van $ 20,000 Less: Book value of Van Cost of passenger van $ 50,000 Less: Depreciation claimed $ 42,500 Book value $    7,500 Gain on sale of Van $ 12,500

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