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trapecia [35]
3 years ago
7

ABO purchased a truck at the beginning of 2018 for $140,000. They sold the truck at the end of 2019 for $95,000. If the expected

useful life of the truck was six years with a residual value of $20,000 and ABO uses straight-line depreciation, which of the following is true regarding the entry to record the sale of the truck?
A. Credit Gain $5,000
B. Debit Loss $5,000.
C. Credit Accumulated Depreciation $40,000.
D. Credit Equipment $100.000.
Business
1 answer:
kompoz [17]3 years ago
5 0

Answer:

Therefore, the entry to record the sale of the truck involves B. Debit Loss $5,000.

Explanation:

First determine the Accumulated depreciation on the Truck

Depreciation Expense = Cost - Residual Value / Estimated Useful years

                                     = ($140,000 - $20,000) / 6

                                     = $20,000

Accumulated Depreciation :

2018 : $20,000

2019 : $20,000

Total : $40,000

Then Process the Sales journal to determine the profit or loss on sale of Truck as follows :

Accumulated Depreciation $40,000 (debit)

Cash $95,000 (debit)

Profit and Loss $5,000(debit)

Cost : Truck $140,000 (credit)

Conclusion :

Therefore, the entry to record the sale of the truck involves B. Debit Loss $5,000.

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