Retirement of fully depreciated asset

[judgeryan]

I am taking a beginning accounting course and was presented with a question on a test regarding the retirement of an asset.

The question simply states, "If a plant asset is retired and is fully depreciated, then..." The two choices that I had the answer narrowed down to were (b)no gain or loss will be recorded and (c)a loss will be recorded. I chose (c) and was marked wrong.

In order to answer this question, my understanding is that we need to know the salvage value of the asset. And without knowing the salvage value, both (b) and (c) can be correct. If the salvage is zero, then (b) is correct. If there is any salvage value, then (c) is correct.

To me, this seems clear and logical. However, my online instructor says I am wrong and is not able to provide me with the "why" I am wrong. Can anyone help me understand why my thinking is incorrect; or in the alternative, how I can better explain it to the instructor.
Thanks!

 

[Triest123]

I am taking a beginning accounting course and was presented with a question on a test regarding the retirement of an asset.

The question simply states, "If a plant asset is retired and is fully depreciated, then..." The two choices that I had the answer narrowed down to were (b)no gain or loss will be recorded and (c)a loss will be recorded. I chose (c) and was marked wrong.

In order to answer this question, my understanding is that we need to know the salvage value of the asset. And without knowing the salvage value, both (b) and (c) can be correct. If the salvage is zero, then (b) is correct. If there is any salvage value, then (c) is correct.

To me, this seems clear and logical. However, my online instructor says I am wrong and is not able to provide me with the "why" I am wrong. Can anyone help me understand why my thinking is incorrect; or in the alternative, how I can better explain it to the instructor.
Thanks!

=> The salvage value is also called the residue value. It is the carrying amount (net book value) of a asset at the end of its useful life (in your words, fully depreciated).
So when the asset is retired at its salvage value, there is no gain or loss on disposal.

If no salvage value is given, then the carrying amount of a asset (after fully depreciated) is "0", any proceeds received from retiring of this asset would be the gain on disposal.