Purchase Solution

# Calculating the recognized gain in the given case

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On April 1, 2004, Norcross Corporation purchased a new machine for \$550,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of \$25,000. The company has recorded monthly depreciation using the straight-line method. On August 1, 2013, the machine was sold for \$65,000. What gain should be recognized from the sale of the machine?

a. \$36,667
b. \$28,333
c. \$5,000
d. \$4,375

##### Solution Summary

Solution describes the steps to calculate the recognized capital gain from the sale of the machine.

##### Solution Preview

Depreciation per month=(550000-25000)/120=\$4375

Period for which machine is ...

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• BEng (Hons) , Birla Institute of Technology and Science, India
• MSc (Hons) , Birla Institute of Technology and Science, India
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