in year 0, Longworth Partnership purchased a machine for $53,500 to use in its b

Question

in year 0, Longworth Partnership purchased a machine for $53,500 to use in its business. In year 3, Longworth sold the machine for $40,700. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,500. (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) Longworth will recognize on the sale?

b. What is the amount and character of the gain (loss) Longworth will recognize on the sale if the sale proceeds were increased to $66,500?

c. What is the amount and character of the gain (loss) Longworth will recognize on the sale if the sale proceeds were decreased to $23,600?

Explanation / Answer

a)

b)

c)

Sales proceeds $ 40,700 Less: Book value of the machine Cost of the machine $ 53,500 Less: Accumulated depreciation $ 22,500 Book value of the machine $ 31,000 Gain on sale of machine $    9,700

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