Answer is A. Gain on sale $ 60000
Working:
Cost of machine on 01 jan, 2011 = $ 500000
Scrap value = $ 20000
Depreciation on straight line method = $(500000 - 20000)/6
= $ 80000 per year
Machine book value on 31 dec, 2011 = $(500000-80000)
= $ 420000
Machine book value on 31 dec, 2012= $(420000-80000)
= $ 340000
Machine sold for = $ 400000
Gain on sale = $ (400000-340000) = $ 60000
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