Question

An asset is purchased on January 1 for $48,700. It is expected to have a useful life of five years after which it will have an expected residual value of $6,800. The company uses the straight-line method. If it is sold for $33,600 exactly two years after it is purchased, the company will record a:

loss of $13,440.

gain of $1,660.

loss of $1,660.

gain of $13,440.

A truck costing $13,300, which has Accumulated Depreciation of $9,130, was sold for $2,130 cash. The entry to record this event would include a:

credit to the Vehicles account for $4,170.

loss of $2,040.

gain of $2,040.

credit to Accumulated Depreciation for $9,130.

B. Darin Company purchased a truck and trailer for $54,000. The appraised values of the truck and trailer are $38,000 and $19,000, respectively. What is the amount of the cost that should be assigned to the trailer?

$19,000

$18,000

$16,000

$22,000

Answer 1

First part
Sale value		$        33,600
Less: Book value
Purchase value	$                      48,700
Less: Depreciation
first year=(48700-6800)/5	$                        8,380
Second year=(48700-6800)/5	$                        8,380
Book value		$        31,940
Gain		$          1,660
Gain of $1,660
Second part
Sale value		$          2,130
Less: Book value
Purchase value	$                      13,300
Less: Accumulated depreciation	$                        9,130	$          4,170
Loss		$        (2,040)
Loss of $2,040
Third part
	Appraised value	Cost booked
Truck	$                      38,000	$        36,000
Trailer	$                      19,000	$        18,000
Total	$                      57,000	$        54,000
Trailer assigned cost is $ 18,000