Question

In: Accounting

A company purchased a truck for 150.000 $ in cash at the beginning of 2017. The...

A company purchased a truck for 150.000 $ in cash at the beginning of 2017. The truck was expected to be used by the company for 5 years. But the company needed urgent cash and decided to sell the truck at the end of 2019. The selling price was 80.000 $ and was collected in cash. What is the profit/loss for the company after these transactions? (Assume that the company uses straight-line depreciation method)

a) 10.000 $ Profit

b) 20.000 $ Profit

c) 70.000 $ Loss

d) 30.000 $ Loss

Solutions

Expert Solution

Purchase Value= $150000. Assuming useful life to be 5 Years and a straight line depreciation to be followed. Annual Depreciation= 150000/5= $30000

The Asset has been used for 3 years. Therefore depreciation for 3 years= 30000*3= $90000. WDV as at the end of 2019= 150000-90000= $60000. Selling Price= $80000. Profit on sale = 80000-60000= $20000. Answer is (b)


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