A firm had a piece of machinery that cost $7,000 when new and has accumulated $4,500 in depreciation. If the machine is sold for $4,000, which of the following is true?

Question

Quizplus · Accepted Answer

The taxable gain or loss on the sale of an asset is calculated by taking the difference between the selling price and the book value (in this case, the cost minus accumulated depreciation). Therefore, the book value of the machinery is $7,000 - $4,500 = $2,500. Since the firm sold the machine for $4,000, the taxable gain is $4,000 - $2,500 = $1,500. Therefore, choice B is the correct answer.

A Firm Had a Piece of Machinery That Cost $7,000