Question

Avocado, Inc. purchased a $100,000 machine and deducted $70,000 of depreciation before selling it for $80,000 (after holding it for more than 1 year). How much gain does Avocado recognize

Answer 1

Answer:Avocado recognizes a gain of $50,000

Explanation:

Book Value  of machine = Purchase Price - Depreciation

$ 100,000 - $70,000 = $30,000

Avocado sold the machine at = $80,000

Therefore,  Gain/(loss) recognized = Selling Price - Book Value on date of sale

$80,000 - $30000 = $50,000

Avocado recognizes a gain of $50,000

Answer 2

Avocado recognizes a gain of $50,000

• The calculation is as follows:

Book Value  of machine = Purchase Price - Depreciation

= $ 100,000 - $70,000

= $30,000

And,  

Avocado sold the machine at = $80,000

So,  

Gain/(loss) recognized = Selling Price - Book Value on date of sale

= $80,000 - $30000

= $50,000

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