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Hank owns a gym called Ultimate Fitness. During the past year, Hank sold some equipment and other assets to upgrade his facility. He sold an elliptical trainer for $400. The buyer also included a juicer machine worth $100. The elliptical trainer had an original cost of $1500 and had accumulated depreciation for tax purposes of $800. What is Hank's realized gain or loss on the sale?A) Loss of $1000B) Loss of $200C) Loss of $1100D) Loss of $300

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Answer:

B) Loss of $200

Explanation:

gain/loss resulting from the exchange = total consideration received - asset's basis

  • assets's basis = $1,500 - $800 = $700
  • total consideration received = $400 + $100 (juicer machine) = $500

gain/loss resulting from the exchange = $500 - $700 = -$200

In this case, Hank can report a net loss resulting from the exchange since the consideration received in exchange for the elliptical trainer was lower than its book value.

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