Question

Sumner sold equipment that it uses in its business for $30,200. Sumner bought the equipment a few years ago for $79,900 and has claimed $39,950 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Answer 1

Sumner had a loss of $9,750.

Explanation:

Given:

Sumner sold equipment that it uses in its business for $30,200.

Sumner bought the equipment a few years ago for $79,900 and has claimed $39,950 of depreciation expense.

Now, to find the amount and character of Sumner's gain or loss.

Sumner sold equipment = $30,200.

Now:

Sumner bought equipment = $79,900.

And it had depreciation expenses = $39,950.

So, total cost of equipment after expenses = $79,900 -$39,950 = $39,950.

As we see the price of equipment purchased is more than the equipment sold.

Thus, it is a loss.

Now, to get the amount of loss we subtract the price of equipment purchased by the equipment sold:

Amount of loss = price at which equipment purchased - price of equipment sold.

`Amount\ of\ loss=\$39,950-\$30,200`

`Amount\ of\ loss=\$9,750`

Therefore, Sumner had a loss of $9,750.