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FRANK PURCHASED EQUIPMENT FOR $50,000 ON MARCH 1, 2014. AS OF TODAY, FRANK HAS TAKEN $20,000 OF DEPRECIATION DEDUCTIONS ON THE EQUIPMENT. DUE TO CURRENT MARKET CONDITIONS, FRANK DECIDES TO SELL THE EQUIPMENT BECAUSE HE CAN SELL IT NOW FOR $60,000. HOW MUCH AND WHAT TYPE OF GAIN DOES FRANK RECOGNIZE WHEN HE SELLS THE EQUIPMENT NOW? A. $30,000 ORDINARY INCOME. B. $30,000 LONG-TERM CAPITAL GAIN. C. $20,000 LONG-TERM CAPITAL GAIN AND $10,000 ORDINARY INCOME. D. $10,000 LONG-TERM CAPITAL GAIN AND $20,000 ORDINARY INCOME.

FRANK PURCHASED EQUIPMENT FOR $50,000 ON MARCH 1, 2014. AS OF TODAY, FRANK HAS TAKEN $20,000 OF DEPRECIATION DEDUCTIONS ON THE EQUIPMENT. DUE TO CURRENT MARKET CONDITIONS, FRANK DECIDES TO SELL THE EQUIPMENT BECAUSE HE CAN SELL IT NOW FOR $60,000. HOW MUCH AND WHAT TYPE OF GAIN DOES FRANK RECOGNIZE WHEN HE SELLS THE EQUIPMENT NOW? A. $30,000 ORDINARY INCOME. B. $30,000 LONG-TERM CAPITAL GAIN. C. $20,000 LONG-TERM CAPITAL GAIN AND $10,000 ORDINARY INCOME. D. $10,000 LONG-TERM CAPITAL GAIN AND $20,000 ORDINARY INCOME.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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FRANK PURCHASED EQUIPMENT FOR $50,000 ON MARCH 1, 2014. AS OF TODAY, FRANK HAS TAKEN $20,000 OF DEPRECIATION DEDUCTIONS ON THE EQUIPMENT. DUE TO CURRENT MARKET CONDITIONS, FRANK DECIDES TO SELL THE EQUIPMENT BECAUSE HE CAN SELL IT NOW FOR $60,000. HOW MUCH AND WHAT TYPE OF GAIN DOES FRANK RECOGNIZE WHEN HE SELLS THE EQUIPMENT NOW? A. $30,000 ORDINARY INCOME. B. $30,000 LONG-TERM CAPITAL GAIN. C. $20,000 LONG-TERM CAPITAL GAIN AND $10,000 ORDINARY INCOME. D. $10,000 LONG-TERM CAPITAL GAIN AND $20,000 ORDINARY INCOME.
Transcribed Image Text:FRANK PURCHASED EQUIPMENT FOR $50,000 ON MARCH 1, 2014. AS OF TODAY, FRANK HAS TAKEN $20,000 OF DEPRECIATION DEDUCTIONS ON THE EQUIPMENT. DUE TO CURRENT MARKET CONDITIONS, FRANK DECIDES TO SELL THE EQUIPMENT BECAUSE HE CAN SELL IT NOW FOR $60,000. HOW MUCH AND WHAT TYPE OF GAIN DOES FRANK RECOGNIZE WHEN HE SELLS THE EQUIPMENT NOW? A. $30,000 ORDINARY INCOME. B. $30,000 LONG-TERM CAPITAL GAIN. C. $20,000 LONG-TERM CAPITAL GAIN AND $10,000 ORDINARY INCOME. D. $10,000 LONG-TERM CAPITAL GAIN AND $20,000 ORDINARY INCOME.
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