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17 July, 08:45

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.

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  1. 17 July, 08:50
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    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.
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