On July 1 2017 Hale Kennels sells equipment for $220000. The equipment originally cost $600000 had an estimated 5-year life and an expected salvage value of $100000. The accumulated depreciation account had a balance of $350000 on January 1 2017 using the straight-line method. The gain or loss on disposal is

A) $30000 gain.
B) $20000 loss.
C) $30000 loss.
D) $20000 gain.

The book value of the equipment at the time of sale is calculated by subtracting the accumulated depreciation from the original cost. The accumulated depreciation from January 1 to July 1 (6 months) is $100,000 ($600,000 - $100,000 salvage value / 5 years = $100,000 per year, $100,000 / 2 = $50,000 for 6 months). So, the total accumulated depreciation is $350,000 + $50,000 = $400,000. The book value is $600,000 - $400,000 = $200,000. The equipment was sold for $220,000, so the gain on disposal is $220,000 - $200,000 = $20,000.