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Sumner sold equipment that it uses in its business for $32,000. Sumner bought the equipment a few years ago for $79,000 and has claimed $39,500 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?

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Answer:

Loss= $7,500

Explanation:

First, we need to calculate the book value of the equipment:

Book value= purchase price - accumulated depreciation

Book value= 79,000 - 39,500

Book value= $39,500

If the selling price is higher than the book value, the company made a profit by selling the equipment.

Gain/loss= selling price - book value

Gain/loss= 32,000 - 39,500

Loss= $7,500

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