A company acquired a truck for $79,000 at the beginning of the fiscal year. It has...

A company acquired a truck for $79,000 at the beginning of the fiscal year. It has a useful life of 5 years and a residual value of $9,000. The company uses the straight-line method of depreciation. After owning the truck for 2 years, the company sold it for $34,000. (a) Determine depreciation expense for each of the first 2 years, and (b) determine the gain or loss resulting from the sale.

Solutions

Expert Solution

a.	Depreciation Expense for:

	Year 1	$ 14,000
	Year 2	$ 14,000

	Working:

	Dereciation Expense Under Straight Line Method			=	(Cost-salvage Value)/Useful Life
				=	(79000-9000)/5
				=	$ 14,000

	Under Straight Line Method, Depreciation Expense is same for all years.


b.
	Loss from sale of machine		$ 17,000

	Working:

	Sales Price				34,000
	Less:Book Value at the time of sale
		Cost		79,000
		Less:Accumualted depreciation		28,000	51,000

	Loss from sale				17,000

ekkarill92 answered 1 year ago

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