In year 0, Longworth Partnership purchased a machine for $52,750 to use in its b
ID: 2466874 • Letter: I
Question
In year 0, Longworth Partnership purchased a machine for $52,750 to use in its business. In year 3, Longworth sold the machine for $39,800. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,300. a. What amount of gain (loss) is recognized on the sale? b. What amount of gain (loss) is recognized on the sale if the sale proceeds were increased to $62,250? c. What amount of gain (loss) is recognized on the sale if the sale proceeds were decreased to $17,100?Explanation / Answer
Solution:
Purchase price of machine 52,750 Less: depreciation 22,300 Book value of machine 30,450 1 Sale proceeds of machine 39,800 Less: Book value of machine 30,450 Gain / -loss 9,350 Character of gain Capial gain 2 Sale proceeds of machine 62,250 Less: Book value of machine 30,450 Gain / -loss 31,800 Character of gain Capial gain 3 Sale proceeds of machine 17,100 Less: Book value of machine 30,450 Gain / -loss -13,350 Character of gain Capital loss