ACME, Inc., uses straight-line depreciation for all of itsdepreciable assets. ACME sold a used piece of machineryon December 31 that it had purchased two years earlier onJanuary 1 for $10,000. When the asset was first acquired,its estimated life was five years and the estimated residualvalue was zero. At the time of disposal, AccumulatedDepreciation was $4,000. If the sales price of the usedmachine was $7,500, the resulting gain or loss on disposalwas which of the following amounts?a. Loss of $2,500 c. Loss of $1,500b. Gain of $3,500 d. Gain of $1,500

Question

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

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