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At the beginning of 2015 company buys a truck at $150,000 with estimated useful life is...

At the beginning of 2015 company buys a truck at $150,000 with estimated useful life is five years. However company sells it at $80,000 at the beginning of 2017 due to urgent cash need. Assume that company uses straight line method. what is the gain or loss from the sale of the truck?

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Answer #1
Computation of gain or loss on sale of truck is as follows:
Gain or loss on sale of truck = Sales proceeds - Book value of truck on 2017
= $ 80,000 - $ 90,000
= $ 10,000 loss
Thus, Loss on sale of truck is $ 10,000
Working note;
Book value of truck on 2017 = Purchase cost - Accumulated Depreciation for 2 years
= $ 150,000 - $ 60,000
= $ 90,000
Depreciation expense per year under straight line method:
Depreciation expense = ( Purchase cost - Salvage value ) / Useful life
= ( $ 150,000 - 0 ) / 5
= $ 30,000 per year
Thus, Accumulated depreciation for 2 years ( 2015 and 2016 ) = $ 30,000 * 2 = $ 60,000
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