The Gladys Corporation buys office equipment costing $1,094,000 on May 12, 2019. In 2022, new and improved models of the equipment make it obsolete, and Gladys sells the old equipment for $34,000 on December 27, 2022.

Refer to the MACRS Depreciation Tables to answer the following questions.

Note: Do not round any division. Round computed yearly depreciation amounts to the nearest whole dollar.

Hint: Don't forget about mid-year convention in the year of disposal when calculating depreciation.

a. Assuming that Gladys takes the maximum cost-recovery deduction allowable on the equipment (7 year recovery period), but does not want to claim bonus depreciation, the Corporation would have a gain of $ 994,366 on the sale.

b. Assuming that Gladys takes the minimum cost-recovery deduction allowable on the equipment (10 year recovery period), the Corporation would have a loss of $ 731,800 on the sale.