Chapter 9, Problem 7MC

ACME. Inc., uses straight-line depreciation for all of its depreciable assets. ACME sold a used piece of machinery on December 31 that it had purchased two years earlier on January 1 for $10,000. When the asset was first acquired, its estimated life was five years and the estimated residual value was zero. At the time of disposal. Accumulated Depreciation was $4,000. If the sales price of the used machine was $7,500, the resulting gain or loss on disposal was which of the following amounts?

1. a. Loss of $2,500
2. b. Gain of $3,500
3. c. Loss of $1,500
4. d. Gain of $1,500