On January 1, 2011, Kinnear Company purchased equipment at a cost of $20,000. The equipment has an estimated useful life of 5 years and a salvage value of $2,000. Kinnear Company uses the straight-line depreciation method for all its assets. Given this information, if Kinnear Company sells the equipment for $13,600 on December 31, 2012, it will have a(n)

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The annual depreciation is ($20,000 - $2,000) / 5 = $3,600. After 2 years, accumulated depreciation is $7,200. The book value at sale is $20,000 - $7,200 = $12,800. Selling for $13,600 results in a $800 gain ($13,600 - $12,800).

On January 1, 2011, Kinnear Company Purchased Equipment at a Cost