Question

Boalsburg Co. purchased a truck on January 1, 2015, for $30,000. The truck had an estimated life of five years and an estimated residual value of $5,000. Boalsburg used the straight-line method to depreciate the asset. On July 1, 2017, the truck was sold for $17,000 cash. The journal entry to record the sale of the truck in 2017

Will this increase the 1) Total Assets or 2) Net Income; or 3) Decrease stockholders' equity or 4) decrease total expenses? HOW?

Answer 1

Answer;

Journal entry for sale of truck

Bank account          dr 17000

Profit&loss account dr     500

          To Truck                         17500

(being asset sold on loss)

Working note;

Depreciation ;( 30000-5000)*2.5/5 =12500

Value of asset =30000-12500=17500

.. It will decrease the stockholders equity because of loss generated on sale of asset is capital loss.