Sumner Sold Equipment That It Uses in Its Business for $30,200

question 84

Multiple Choice

Sumner sold equipment that it uses in its business for $30,200. Sumner bought the equipment a few years ago for $79,900 and has claimed $39,950 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?

• A)$9,750 §1231 loss.
• B)$9,750 §1245 loss.
• C)$49,700 ordinary loss.
• D)$9,750 capital loss.
• E)None of the choices are correct.

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, freedom of entry and exit, and perfect knowledge.

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent or salaries.

Perfectly Competitive

A market structure characterized by many buyers and sellers, free entry and exit, homogenous products, and perfect information, leading to firms being price takers.

Demand Curve

A visual representation indicating the link between the price of an item and the quantity of it that buyers seek.