Question

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?

Answer 1

Amount is $400,000. It is a gain on disposal.

Step-by-step explanation:

Cost = $600,000

Accumulated depreciation = $200,000

Net book value = $600,000 - $200,000

= $400,000

Sales proceed = $800,000

Gain/loss on disposal = Sales proceed - Net book value

= $800,000 - $400,000

= $400,000

Amount is $400,000. It is a gain on disposal.

Answer 2

Gain = $400,000

Step-by-step explanation:

The capital gain or loss from the sale of building can be computed as follows,

Purchase price = 600,000

Depreciation = 200,000

Sale price = 800,000

Gain/Loss = Sale price - (Purchase price - depreciation )

Gain = 800,000 - (600,000 - 200,000)

Gain = $400,000

The building is sold for $400,000 more than its net book value.

Hope that helps.