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Sale of a Depreciable PPE Asset Management plans to sell equipment and reviews the following transaction history: 2010: Equipment bought for $30,000 before tax, with
Sale of a Depreciable PPE Asset
Management plans to sell equipment and reviews the following transaction history:
- 2010: Equipment bought for $30,000 before tax, with a sales tax of 3.5%. Shipping costs at FOB Shipping Point were determined to be $200 afterward (i.e. shipping and tax are separate).
- 2011: Management hires an outside contractor to install the equipment in their factory. The invoice was $4,000.
- 2013: The equipment is discovered to have a malfunction, and its wiring must be repaired. The invoice for this repair was $1,500.
- 2015: Management installs an $800 2-core generator which allows the equipment to generate units at 2x the rate it did before.
- From 2015-2020, the equipment was in use. (For the sake of this question, assume 2015-2020 is when it depreciates.)
Management determines the equipment to have a $9,000 salvage value and a total useful life of 8 years. Assuming a straight-line depreciation method, if the company sells the equipment at the end of 2020 for $45,000, what is the gain/loss of the sale of equipment? Round everything to whole numbers.
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