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12 February, 19:51

Glenn sells a piece of equipment used in his business for $31,500 during 2019. The equipment was purchased on July 1, 2017, at a cost of $22,000. Glenn has taken $6,600 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Glenn?

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  1. 12 February, 20:20
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    A gain of $16,100

    Explanation:

    When the amount received from the disposal of an asset is higher than the carrying value of the asset, the company makes a gain on disposal.

    The carrying amount of an asset is the difference between the cost of the asset and the accumulated depreciation of the asset.

    Carrying amount

    = $22,000 - $6,600

    = $15,400

    Gain / (loss) on sale of asset

    = $31,500 - $15,400

    = $16,100
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