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A company purchased a building for $850,000 on January 1, 2010. As of December 31, 2014, $200,000 of accumulated depreciation had been recorded related to this building. The building was sold to another party for $1,250,000 on January 1, 2015. On the sale of this building, the company should recognize:

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Nyctalus

Answer: Gain of $600,000

Explanation: As we know that :-

Gain / loss = Sales value - Cost of building

Now, we can compute cost of building on date of sale as follows :-

cost = purchase date cost - accumulated depreciation

        = $850,000 - $ 200,000

        = $650,000

putting the values into initial equation we get :-

Gain = $1,250,000 - $650,000

        = $600,000

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