Question

[The following information applies to the questions displayed below.] Moran owns a building he bought during year 0 for $246,000. He sold the building in year 6. During the time he held the building he depreciated it by $34,250.

What is the amount and character of the gain or loss Moran will recognize on the sale in each of the following alternative situations? (Loss amounts should be indicated by a minus sign. Enter NA if a situation is not applicable. Leave no answer blank. Enter zero if applicable.)

a. Moran received $233,000.

b. Moran received $258,000.

c. Moran received $198,000.

Answer 1

WORKING NOTES:
CALCULATION OF BOOK VALUE OF THE BUILDING
	Purchase value of the building	$                  2,46,000
	Less: Depreciation Expenses	$                     34,250
	Book Value at the end of year 6	$                  2,11,750
SOLUTION - A
	MORAN RECEIVED $ 233,000
	CALCULATION OF GAIN OR LOSS ON SALE OF BUILDING
	Sale value of Building	$                  2,33,000
	Less: Book Value of the Building at end of year 6	$                  2,11,750
	Gain (Loss)	$                     21,250
	Answer = Gain of $ 21,250
SOLUTION - B
	MORAN RECEIVED $ 258,000
	CALCULATION OF GAIN OR LOSS ON SALE OF BUILDING
	Sale value of Building	$                  2,58,000
	Less: Book Value of the Building at end of year 6	$                  2,11,750
	Gain (Loss)	$                     46,250
	Answer = Gain of $ 21,250
SOLUTION - C
	MORAN RECEIVED $ 198,000
	CALCULATION OF GAIN OR LOSS ON SALE OF BUILDING
	Sale value of Building	$                  1,98,000
	Less: Book Value of the Building at end of year 6	$                  2,11,750
	Gain (Loss)	$                    -13,750
	Answer = Loss of $ 13,750