What is the book value of the equipment just before sale?

• A. 10,000
• B. 15,000
• C. 40,000
• D. 30,000

Answer: (A)

Book value just before sale is the asset’s recorded cost minus the accumulated depreciation up to that date. It represents the carrying amount the government would use to compare against the sale price to determine gain or loss on disposal. In this problem, the data on the books produce a carrying amount of 10,000, which is cost minus accumulated depreciation. For example, if the original cost were 25,000 and accumulated depreciation were 15,000, the book value would be 10,000. The other numbers would require different cost or depreciation amounts, but the essential rule is cost minus accumulated depreciation equals the book value.