Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?

Question

Quizplus · Accepted Answer

To calculate the gain or loss realized on the machine, we need to determine the machine's adjusted basis (i.e., the original cost minus accumulated depreciation).

Adjusted basis = $2,600 - $1,200 = $1,400

The gain or loss is then calculated as follows:

Proceeds from sale = $2,200 
Adjusted basis = $1,400

Gain or loss = $2,200 - $1,400 = $800

Since the proceeds from the sale were less than the adjusted basis, there is a loss of $800 realized on the machine. Therefore, the correct answer is C.

Leesburg Sold a Machine for $2,200 on November 10th of the Current