Alliance Products purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use. For what amount should Alliance record the gain or loss if the equipment is sold for $25,000?

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Alliance Products purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use. For what amount should Alliance record the gain or loss if the equipment is sold for $25,000?

A) A gain of $5,000.

B) A loss of $5,000.

C) Neither a gain nor a loss since the equipment was sold at its book value.

D) Neither a gain nor a loss since the gain would not be recognized.

Answer: B

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