Ronny's Red Hat Company purchased machinery on August 3, Year 1 for $150,000. Ronny, the owner, estimated that the machinery would be sold for $30,000 in 10 years. If Ronny's red Hat Company uses straight line depreciation, what is included in the entry to record the disposition of the asset on July 31 , Year 3 if the machinery is sold for $120,000 cash?

Multiple Choice

Dr. Loss on disposition $6,000

Dr. Loss on disposition $2500

Cr. Gain on disposition $4,000

Cannot be determined with the data provided

Dr. Loss on disposition $ 4000