Answer:
1.
Debit Depreciation Expense $2,000
Credit Accumulated depreciation $2,000
2.
Debit Cash $58,000
Debit Accumulated depreciation account $56,000
Debit Loss on asset disposal $12,000
Credit Delivery truck asset $126,000
3.
Debit Cash $80,000
Debit Accumulated depreciation account $56,000
Credit Gain on asset disposal $10,000
Credit Delivery truck asset $126,000
Explanation:
Farm Fresh uses straight-line depreciation, Depreciation Expense each year is calculated by following formula:
Annual Depreciation Expense = (Cost of asset − Residual Value )/Useful Life = ($126,000-$30,000)/8 = $12,000
Depreciation Expense in 2013 = ($12,000/12)x6 = $6,000
1. From January 1, 2018 to March 1, 2018, the truck was in service for 2 months
Depreciation Expense in 2018 = ($12,000/12)x2 = $2,000
The entry:
Debit Depreciation Expense $2,000
Credit Accumulated depreciation $2,000
2.
From July 1, 2013 to March 1, 2018, the truck was in service for 4years and 8 months
Accumulated depreciation = $6,000 + $12,000 x 4 + $2,000 = $56,000
Carrying amount of the asset = Cost of asset - Accumulated depreciation = $126,000 - $56,000 = $70,000
Sale price - Carrying amount of the asset = $58,000-$70,000 = -$12,000
The company recognized loss on the sale $12,000.
The entry:
Debit Cash $58,000
Debit Accumulated depreciation account $56,000
Debit Loss on asset disposal $12,000
Credit Delivery truck asset $126,000
3.
Sale price - Carrying amount of the asset = $80,000-$70,000 = $10,000
The company recognized gain on the sale $10,000
The entry:
Debit Cash $80,000
Debit Accumulated depreciation account $56,000
Credit Gain on asset disposal $10,000
Credit Delivery truck asset $126,000
