Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

Gains on an income statement are calculated as which of the following?

1. Total sales minus total costs

2. Proceeds from sales minus book value of the sold asset

3. Net cash received minus liabilities

4. Total income minus expenses

The correct answer is: Proceeds from sales minus book value of the sold asset

The calculation of gains on an income statement is determined by the proceeds from sales minus the book value of the sold asset. This definition captures the essence of what constitutes a gain in financial reporting. When an asset is sold, the proceeds refer to the amount received from that sale. The book value represents the carrying value of the asset on the balance sheet, reflecting its original cost adjusted for any depreciation or amortization taken against it. The difference between these two figures indicates the gain (or loss) realized from the sale. If the proceeds exceed the book value, a gain is recognized, highlighting the profit made from the transaction. This concept is essential for understanding how businesses track performance and assess profitability over time. Other options, while related to financial analysis, do not specifically define gains in terms of asset sales. Total sales minus total costs provides a gross profit measure, while net cash received minus liabilities pertains to cash flow and financial obligations rather than asset sales. Lastly, total income minus expenses leads to net income, which encompasses all revenues and costs, rather than focusing solely on the gains from asset transactions.