Question

FedEx Corporation is the world's leading express-distribution company. In addition to the world's largest fleet of all-cargo aircraft, the company has more than 53,700 ground vehicles that pick up and deliver packages. Assume FedEx sold a delivery truck for $16,000. FedEx had originally purchased the truck for $28,000, and had recorded depreciation for 3 years.
1) Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was: (a) $12,000, (b) $10,000, (c) $15,000.
2) Using the following structure, indicate the effects (accounts, amounts, and + or -) for the disposal of the truck in each of the three preceding situations.
Assets = Liabilities + Stockholders' Equity
3) Prepare the journal entry to record the disposal of the truck for each situation in requirement 1.

Answer 1

Answer:

 

1) Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was:

(a) $12,000,   0

(b) $10,000,  Loss  2000

(c) $15,000.   Gain 3000

2) Using the following structure, indicate the effects (accounts, amounts, and + or -) for the disposal of the truck in each of the three preceding situations.

Assets = Liabilities + Stockholders' Equity

Cash+Net Fixxed Asset=Liabilities+truck sold+sale-net-loss in sale  

 

´=16000+(-28000+12000)=0+(16000-(28000-12000))  

3) Prepare the journal entry to record the disposal of the truck for each situation in requirement 1.

Depreciation a 12000  

 

Db Cash___________________ 16000  

Depreciation________________ 12000  

Fix asset____________________________________  28000

 

Depreciation b 10000  

 

Db Cash___________________ 16000  

Depreciation_______________         10000  

Fix asset____________________________________  28000

Loss in disposal of fixed asset_______2000  

 

Depreciation c 15000  

 

Db Cash___________________ 16000  

Depreciation________________ 15000  

Fix asset____________________________________  28000

Income in disposal of fixed asset__________________  3000

Explanation:

Truck sold 16000  

Purchased 28000  

Depreciation a 12000  

Depreciation b 10000  

Depreciation c 15000  

 

Cash+Net Fixxed Asset=Liabilities+truck sold+sale-net-loss in sale  

 

´=16000+(-28000+12000)=0+(16000-(28000-12000))  

 

 

Depreciation a 12000  

 

Db Cash___________________ 16000  

Depreciation________________ 12000  

Fix asset____________________________________  28000

 

Depreciation b 10000  

 

Db Cash___________________ 16000  

Depreciation_______________         10000  

Fix asset____________________________________  28000

Loss in disposal of fixed asset_______2000  

 

Depreciation c 15000  

 

Db Cash___________________ 16000  

Depreciation________________ 15000  

Fix asset____________________________________  28000

Income in disposal of fixed asset__________________  3000