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Corporate Finance

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Capital Gain on a Depreciable Asset

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The pizza parlor you own is replacing its ovens with new, solar powered ones. The old ovens cost \$100,000 five years ago and are being depreciated using straight line depreciation over 10 years to a zero salvage value. A liquidator has offered you \$20,000 for the old ovens.

What is the amount of your capital gain or loss?

A

\$20,000 gain

B

\$30,000 loss

C

\$50,000 loss

D

\$30,000 gain