Question

Goyo Industries (a sole proprietorship) sold three § 1231 assets during 2019. Data on these property dispositions are as follows:
Asset Cost Acquired Depreciation Sold For Sold On
Machine #1 $85,000 08/31/15 $32,000 $60,000 12/04/19
Machine #2 $30,000 11/17/16 $12,000 $15,000 12/04/19
Machine #3 $77,000 02/28/18 $28,000 $51,000 12/04/19
1. Determine the amount and the character of the recognized gain or loss from the disposition of each asset.

Answer 1

Answer:

Machine #1 - $7,000, gain

Machine #2 - $3,000, loss

Machine #3 - $2,000, gain

Explanation:

Given;

Machine #1

Asset Cost = $85,000

Acquired Depreciation = $32,000

Sales price = $60,000

From the above information, the book value of machine #1

= $85,000 - $32,000

= $53,000

Gain/(loss) on disposal = $60,000 - $53,000

                                      = $7,000

A gain of $7,000 on disposal.

Machine #2

Asset Cost = $30,000

Acquired Depreciation = $12,000

Sales price = $15,000

From the above information, the book value of machine #2

= $30,000 - $12,000

= $18,000

Gain/(loss) on disposal = $15,000 - $18,000

                                      = ($3,000)

A loss of $3,000 on disposal

Machine #3

Asset Cost = $77,000

Acquired Depreciation = $28,000

Sales price = $51,000

From the above information, the book value of machine #1

= $77,000 - $28,000

= $49,000

Gain/(loss) on disposal = $51,000 - $49,000

                                      = $2,000

A gain of $2,000 on disposal.