On January 1, 2020, a Machine Was Purchased for $12,000

question 119

Multiple Choice

On January 1, 2020, a machine was purchased for $12,000. The machine was estimated to have a 10 year useful life and a residual value of $500. Straight-line depreciation is to be used. On January 1, 2022, the machine was then exchanged for computer equipment with a fair value of $10,000. Assuming that the exchange had commercial substance, how much would be recorded as a gain on disposal of the machine on January 1, 2022?

• A)$0
• B)$300
• C)$400
• D)$500