Barry Corporation sold a machine used in its business for tw

Barry Corporation sold a machine used in its business for two years for $27,000. The machine originally cost $24,000 and it had an adjusted basis at the time of the sale of $17,000. What is the amount and type of gain realized on the sale?

Solution

Solution:

Sale value of machine = $27,000

Original cost of machine = $24,000

Adjusted basis on machine = $17,000

Total gain = sale value - adjusted basis

= $27,000 - $17,000 = $10,000

Ordinary gain = original cost of machine - adjusted basis = $24,000 - $17,000 = $7,000

Capital gain = sale value - original cost

= $27,000 - $24,000 = $3,000