Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows: If Tara sells the machine after three years for $15,000,how much gain should she recognize?
A)$3,480
B)$6,360
C)$9,240
D)$11,480
E)None of these

Question

Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows:  If Tara sells the machine after three years for $15,000,how much gain should she recognize?
A)$3,480 
B)$6,360 
C)$9,240 
D)$11,480 
E)None of these

Quizplus · Accepted Answer

Cost $40,000
Less the greater of cost recovery allowed or allowable
($16,000 + $12,800 + $7,680)(36,480)
Adjusted basis $ 3,520
The recognized gain is $11,480 ($15,000 - $3,520).

Tara Purchased a Machine for $40,000 to Be Used in Her