Question

1. A truck cost $60,000 when purchased and has a $60,000 balance in the accumulated depreciation...

1. A truck cost $60,000 when purchased and has a $60,000 balance in the accumulated depreciation account. If the truck is discarded, we will record:

a. credit to accumulated depreciation, $60,000

b. debit to accumulated depreciation, $60,000

c. debit to truck, $60,000

d. loss on disposal, $60,000

2. A truck cost $60,000 when purchased and has a $50,000 balance in accumulated depreciation account. If the truck is sold for $5,000 cash, we will record:

a. no entry required

b. loss on disposal, $5,000

c. no gain or loss

d. gain on disposal $5,000

Homework Answers

Answer #1

1. Cost of truck = $ 60,000.

Accumulated Depreciation = $ 60,000.

So when the truck is discarded the entry will be a debit to Accumulated Depreciation and a credit to truck.

So option B is the correct answer.

That is a debit to Accumulated Depreciation, $ 60,000.

2. Cost of truck = $ 60,000.

Accumulated Depreciation = $ 50,000.

Sale proceeds = $ 5,000.

Book value on sale = Cost - Accumulated Depreciation.

Book value on sale = 60,000 - 50,000

Book value on sale = $ 10,000.

So book value having $ 10,000 is sold for $ 5,000 which means that there is a loss of $ 5,000 on sale of truck.

The entry will be,

Cash Ac Dr. $ 5,000

Accumulated Depreciation Dr $ 50,000

Loss on sale of truck Dr $ 5,000

To Truck. Ac Cr. $ 60,000

Hence, option B is the correct answer.

That is loss on disposal, $ 5,000.

SUMMARY:

1. Option B is the correct answer.

2. Option B is the correct answer.

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