Question

On October 31, 2017, Aziz Company sells a truck that originally cost 140,000 SA for 95,000 SA cash. The truck was placed in service on January 1, 2012. It was depreciated using the straight-line method with an estimated salvage value of 28,000 and a useful life of 10 years. Record all the transactions?

Answer 1

SOLUTION:

Straight Line Depreciation per year = (Cost – Salvage Value) / Useful Life

Straight Line Depreciation per year = (140,000 – 28,000) / 10

Straight Line Depreciation per year = 11,200

Accumulated depreciation: 11,200*5 years + 11,200*10months / 12months = 65,333

Gain/ (Loss) on Sale of Truck = Sale Proceeds -(Original vale-Depreciation)

= 95,000 - (140,000 - 65,333)

= 20,333 (gain)

Journal entry:

Cash 95,000

Accumulated Depreciation—Equipment 65,333

Equipment 140,000

Gain on sale of equipment $2,033