In year 0, Shortworth Partnership purchased a machine for $64,750 to use in its
ID: 2570459 • Letter: I
Question
In year 0, Shortworth Partnership purchased a machine for $64,750 to use in its business. In year 3, Shortworth sold the machine for $43,200. Between the date of the purchase and the date of the sale, Shortworth depreciated the machine by $23,900. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
a. What is the amount and character of the gain (loss) Shortworth will recognize on the sale?
Total Gain/(Loss) Recognized: ___________________
Character of Recognized Gain/(Loss): ________________
Ordinary Gain/(Loss): __________________
1231 gain/(loss):_________________
b. What is the amount and character of the gain (loss) Shortworth will recognize on the sale if the sale proceeds were increased to $67,500?
Total Gain/(Loss) Recognized: ___________________
Character of Recognized Gain/(Loss): ________________
Ordinary Gain/(Loss): __________________
1231 gain/(loss):_________________
c. What is the amount and character of the gain (loss) Shortworth will recognize on the sale if the sale proceeds were decreased to $16,500?
Total Gain/(Loss) Recognized: ___________________
Character of Recognized Gain/(Loss): ________________
Ordinary Gain/(Loss): __________________
1231 gain/(loss):_________________
Explanation / Answer
Cost 64750 Acc Dep -23900 NBV 40850 Case a Selling price 43200 NBV 43200 Gain 2350 Character of Gain 1231 gain Case b Selling price 67500 NBV 40850 Gain 26650 Character of Gain 1231 gain Case c Selling price 16500 NBV 40850 Gain -24350 Character of Loss 1231 loss or Ordinary Loss