On July 1, 2021, a company sold a machine for $3,500 cash that it had used for 8.5 years. The machine original machine cost was $20,000, and the machine was being depreciated using the straight-line deprecation method assuming a useful life of 10 years and $0 residual value. Depreciation had been recorded on the machine up through December 31, 2020. What gain or loss will be reported on the income statement for the sale of the machine?

1.Loss of $3,500

2.Loss of $500

3.Gain of $3,500

4.Gain of $500

5.A gain or loss cannot be determined based on the information provided.