Mogilny Company paid \(135,000 for a machine. The Accumulated Depreciation- Equipment account has a balance of \)46,500 at the present time. The company could sell the machine today for $150,000. The company president believes that the company has a “right to this gain.” What does the president mean by this statement? Do you agree?

An unrealized gain is an increment in the asset value or investment that is yet to be sold by the investor, like open-stock status. A gain takes place when the market price of an asset exceeds the amount paid by the investor.

According to the given situation, it is agreed that the president is right regarding “the excess amount of sale on the machine will be measured as the gain on sale of the machine.” The president is saying about the gain that will be obtained by selling the machine for $150,000. Mogilny Company purchased the machine for $135,000, and the accumulated depreciation on the machine is $46,500. According to this, the present value of the machine is the cost of acquisition minus accumulated depreciation on the machine, which equals $88,500 ($135,000 - $46,500). Therefore, the purchase price is less than the selling price, which implies profit.