discusses the concept of a gain or loss on an asset. I want to make sure I explain this in an easy way. If you have a piece of machinery that you purchased for $5,000 20 years ago, it is most likely fully depreciated. By this, I mean that the asset had a life of say 7 years and the 7-year period has run out and there is no book value (cost accumulated depreciation). If the company sells the item for $1,000, they will have to record a journal entry. It would look like this:

Cash $1,000

Accumulated Depreciation $5,000

Machinery $5,000

Gain on Sale of Asset $1,000

Do you agree or disagree and why?