38. LO.6, 7 On December 1, 2019, Lavender Manufacturing Company (a corporation)

purchased another company’s assets, including a patent. The patent was used in Lavender’s manufacturing operations; $49,500 was allocated to the patent, and it was amortized at the rate of $275 per month. On July 30, 2021, Lavender sold the patent for $95,000. Twenty months of amortization had been taken on the patent.

What are the amount and nature of the gain Lavender recognizes on the disposition of the patent? Write a letter to Lavender, discussing the treatment of the gain.

Lavender’s address is 6734 Grover Street, Boothbay Harbor, ME 04538. The letter should be addressed to Bill Cubit, Controller.