A factory machine is purchased on January 1, 20X1 for $20,000. The machine had an expected 9-year useful life and a $2,000 estimated salvage value. On January 1, 20X7, the asset is sold for cash of $3,500.

1. Determine the total amount of depreciation expense taken over the life of the asset up to the day it is sold. Assume the company uses the straight-line method and has a calendar year.
2. Determine the assets book value on the day it is sold.
3. Determine if the asset is sold at a gain or a loss.
4. Show the effect on the accounting equation when the asset is sold.