On January $1,20$X$5,$ Pastel Colors Corporation purchased drilling equipment for $$11,500.$ The equipment had an estimated useful life of four years and a salvage value of $$500.$ Assuming that Pastel Colors uses the straight$-$line method of depreciation. On July $1,20$X$7,$ Pastel sells the equipment for $$4,000.$ What amount of gain or loss would Pastel record on the sale of the drilling equipment?

$$4,000$ gain

$$3,500$ gain

$$125$ loss

$$625$ loss