An asset was sold for $1200. If $700 had been claimed in depreciation and a $200 net gain was realized, what was the original purchase price of the asset?

An asset was sold for $1200. If $700 had been claimed in depreciation and a $200 net gain was realized, what was the original purchase price of the asset?

• A. $1500
• B. $1700
• C. $1900
• D. $2100

Answer: (B)

Understanding this asks you to link sale proceeds, depreciation already taken, and the gain or loss on sale through book value. The net gain on the sale is the difference between the sale price and the asset’s book value. So book value = sale price minus gain = $1,200 − $200 = $1,000. Book value equals the original cost minus accumulated depreciation. With $700 of depreciation already claimed, the original purchase price is $1,000 + $700 = $1,700. The original purchase price was $1,700.

Understanding this asks you to link sale proceeds, depreciation already taken, and the gain or loss on sale through book value.

The net gain on the sale is the difference between the sale price and the asset’s book value. So book value = sale price minus gain = $1,200 − $200 = $1,000.

Book value equals the original cost minus accumulated depreciation. With $700 of depreciation already claimed, the original purchase price is $1,000 + $700 = $1,700.

The original purchase price was $1,700.