Question

Required information (The following information applies to the questions displayed below.) In year 0, Canon purchased a machine to use in its business for $56,000. In year 3, Canon sold the machine for $42,000. Between the date of the purchase and the date of the sale, Canon depreciated the machine by $32,000. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) c. What is the amount and character of the gain or loss Canon will recognize on the sale, assuming that it is a corporation and the sale proceeds were increased to $60,000? Amount Description Total Gain/(Loss) Recognized Character of Recognized Gain/(Loss): Ordinary Gain/(Loss) $1231 gain/loss)

Answer 1

Answer :

(c).

Particulars	Amount ($)	Amount ($)
Amount realized on sale of machine		60000
Original Basis of machine	56000
Less ; Accumulated depreciation	32000
Adjusted Basis		24000
Gain/(Loss) Recognized		36000
Sec.1245 Depreciation Recapture		(32000)
Sec.1245 Gain		4000