Question

On October 31, 2017, Aziz Company sells a truck that originally cost 140,000 SA for 95,000 SA cash. The truck was placed in service on January 1, 2012. It was depreciated using the straight-line method with an estimated salvage value of 28,000 and a useful life of 10 years. Record all the transactions?

Answer 1

Journal Entry:

On Purchase of Truck:

01.01.2012	Truck (Fixed Assets)	Dr	1,40,000
	Bank	Cr		1,40,000

Depreciation expense entry at year end 2012 to 2016

	Depreciation Expense	Dr	11,200
	Accumulated Depreciation	Cr		11,200

Depreciation entry at time of sale for 10 months in Year 2017

31.10.2017	Depreciation Expense	Dr	9,333
	Accumulated Depreciation	Cr		9,333

Entry on Sale of Truck

31.10.2017	Accumulated Depreciation	Dr	65,333
	Bank	Dr	95,000
	Truck (Fixed Assets)	Cr		1,40,000
	Profit on Sale of Truck	Cr		20,333

Depreciation Working:

Annual Depreciation = (140,000 - 28,000) / 10 Years = 11,200

Depreciation for 10 Months = 11,200*10/12 = 9,333