If original price is $1700 and depreciation $700, what sale price would yield a net gain of $200?

If original price is $1700 and depreciation $700, what sale price would yield a net gain of $200?

• A. $1000
• B. $1100
• C. $1200
• D. $1300

Answer: (C)

Depreciation lowers the asset’s value to its book value, which is what you compare against when measuring gain. The book value here is 1700 minus 700, which equals 1000. Net gain from a sale is the sale price minus this book value. To have a net gain of 200, set sale price minus 1000 equal to 200. Solve: sale price = 1200. So the sale price that yields a net gain of $200 is $1200. If you sold for $1000 you’d have no gain, for $1100 you’d have a $100 gain, and for $1300 you’d have a $300 gain.

Depreciation lowers the asset’s value to its book value, which is what you compare against when measuring gain. The book value here is 1700 minus 700, which equals 1000. Net gain from a sale is the sale price minus this book value. To have a net gain of 200, set sale price minus 1000 equal to 200. Solve: sale price = 1200. So the sale price that yields a net gain of $200 is $1200. If you sold for $1000 you’d have no gain, for $1100 you’d have a $100 gain, and for $1300 you’d have a $300 gain.