Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased
for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the
sale. What is Leesburg's gain or loss realized on the machine?
A. $800 gain.
B. $1,000 gain.
C. $1,200 loss.
D. $1,400 loss.
E. None of these.

The answer is A.

Explanation:

The carrying amount or net book value of an asset is the difference between its historical cost of acquisition and its accumulated depreciation.

To recognize a gain or loss its net book value at the date of sale must be compared with sales price. It a gain if sales price is higher than Net Book Value and loss if sales price is lesser than sales price.

Historical cost of the machine is $2,600

Accumulated depreciation is $1,200

Selling price is $2,200

Net Book Value is

$2,600 - $1,200

=$1,400.

Gain realized on the machine is

$2,200 - $1,400

=$800 gain