Question

The truck was purchased on January 1, 2018 for $100,000 and is depreciated using the double-declining balance method. The truck has a salvage value of $10,000 and an estimated useful life of five years. On December 31, sold truck for $30,000 cash. Hint: Two years (2018 and 2019) of depreciation expense have been recorded and the total depreciation for the two-year period is in accumulated depreciation immediately before the sale of the truck.

Please let me know what the debit and credit amounts and account titles would be on the general ledger.
 

Answer 1

Ans.	*Calculations for Depreciation expenses, accumulated depreciation and book value:
	Double declining balance method:
	Double declining balance depreciation rate = 2 * 1 / life of assets
		2 * 1 / 5
		40%
	*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate
		DDB Depreciation for the Period	End of Period
	Year	Beginning of period	Depreciation	Depreciation	Accumulated	Book
		Book value	Rate	Expenses (a * b)	Depreciation	Value
	2018	$100,000	40%	$40,000	$40,000	$60,000
	2019	$60,000	40%	$24,000	$64,000	$36,000
	Total
	*Journal Entry :
	General Journal	Debit	Credit
	Cash	$30,000
	Accmulated depreciation - Truck	$64,000
	Loss on sale of truck	$6,000
	Truck		$100,000
	(To record the sale of truck on loss)
	*Loss on sale of truck = Book value of truck on 31 Dec. 2019 - Sales value of truck
	$36,000 - $30,000
	$6,000
	Sales value > Book value = Gain on sale of truck
	Sales value < Book value = Loss on sale of truck
	Sales value = Book value = No profit no loss