In: Accounting
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on January 1, 2012, for $39,500. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $4,000. At December 31, 2015, the truck had a book value of $11,100.
Required:
1. | Prepare any necessary journal
entries to record the sale of the truck, assuming it sold for:
|
||||
2. | How should the gain or loss on disposal be reported on the income statement? | ||||
3. | Assume that Swann uses IFRS and sold the truck for $11,025. In addition, Swann had previously recorded a revaluation surplus related to this machine of $5,000. What journal entries are required to record the sale? |
If sold for $11,025 |
If sold for $7,525 |
|||
Accounts titles |
Debit |
Credit |
Debit |
Credit |
Cash |
$ 11,025.00 |
$ 7,525.00 |
||
Accumulated Depreciation |
$ 28,400.00 |
$ 28,400.00 |
||
Loss on disposal |
$ 75.00 |
$ 3,575.00 |
||
Truck |
$ 39,500.00 |
$ 39,500.00 |
||
(truck sold) |
The Loss on Disposal is taken to the ‘’Other income and expenses” section in the multi step income statement. In single step income statement, Loss on disposal is shown under ‘’Expenses”.
Journal Entry in that case, would be:
If sold for $11,025 |
||
Accounts titles |
Debit |
Credit |
Cash |
$ 11,025.00 |
|
Accumulated Depreciation |
$ 28,400.00 |
|
Revaluation Surplus |
$ 75.00 |
|
Truck |
$ 39,500.00 |