LO.2, 3 On December 1, 2010, Lavender Manufacturing Company (a corporation)

purchased another company’s assets, including a patent. The patent was used in Lavender’s manufacturing operations; $49,500 was allocated to the patent, and it was amortized at the rate of $275 per month. On July 30, 2012, Lavender sold the patent for $75,000.

Twenty months of amortization had been taken on the patent. What are the amount and nature of the gain Lavender recognizes on the disposition of the patent? Write a letter to Lavender discussing the treatment of the gain. Lavender’s address is 6734 Grover Street, Boothbay Harbor, ME 04538. The letter should be addressed to Bill Cubit, Controller.