The gain or loss on disposal of an asset is calculated as:

• A. Proceeds from sale minus the asset's carrying amount (book value)
• B. Proceeds from sale plus accumulated depreciation
• C. Original cost of the asset minus accumulated depreciation
• D. Original cost of the asset minus proceeds from sale

Answer: (A)

Verified step by step guidance

1. Understand the concept of 'gain or loss on disposal of an asset': It represents the financial result of selling an asset, calculated by comparing the proceeds from the sale to the asset's carrying amount (book value).
2. Identify the formula for calculating the gain or loss: Gain or Loss = Proceeds from Sale - Carrying Amount (Book Value).
3. Clarify the components of the formula: The 'Proceeds from Sale' refers to the amount received from selling the asset, and the 'Carrying Amount' is the asset's original cost minus accumulated depreciation.
4. Evaluate the incorrect options: For example, 'Proceeds from sale plus accumulated depreciation' does not align with the formula, as accumulated depreciation is already factored into the carrying amount.
5. Apply the correct formula to solve similar problems: Always subtract the carrying amount (original cost minus accumulated depreciation) from the proceeds of the sale to determine the gain or loss.