Alliance Products Purchased Equipment That Cost $120,000

Alliance Products purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use for $25,000 cash. Alliance should record:

A) a gain of $5,000.
B) a loss of $5,000.
C) neither a gain or a loss since the computer was sold at its book value.
D) neither a gain nor a loss since the gain would not be recognizeD.$120,000/4 = depreciation of $30,000 per year. After three years, the book value would be [$120,000 - ($30,000 x 3 years) ] = $30,000. The asset was sold for $25,000 or a $5,000 loss below book value.