Question

Swann Company sold a delivery truck on April 1, 2019. Swann had acquired the truck on January 1, 2015, for $39,500. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $3,000. Swann uses the straight-line method of depreciation. At December 31, 2018, the truck had a book value of $10,300.

Required:

1.	Prepare any necessary journal entries to record the sale of the truck, assuming it sold for: a. $10,125 b. $6,725
2.	How should the gain or loss on disposal be reported on the income statement?
	Assume that Swann uses IFRS and sold the truck for $10,125. In addition, Swann had previously recorded a revaluation surplus related to this machine of $4,000. What journal entries are required to record the sale?   1a. Prepare the necessary journal entries on April 1, 2019 to record: 1. Depreciation expense of the delivery truck for 2019 2. The sale of the truck, assuming it sold for $10,125 1b. Prepare the necessary journal entries on April 1, 2019 to record: 1. Depreciation expense of the delivery truck for 2019 2. The sale of the truck, assuming it sold for $6,725 3. Assume that Swann uses IFRS and sold the truck for $10,125. In addition, Swann had previously recorded a revaluation surplus related to this machine of $4,000. 1. Depreciation expense of the delivery truck for 2019 2. The sale of the truck, assuming it sold for $10,125 3. Other adjustments related to removing the delivery truck from the books

Answer 1

Ans: Depreciation= Depreciable amount/life i..e number of years

=> 39,500-3,000/5

=> 36,500/5

=> 7,300

Closing Written down value= Cost- Depreciation for 4 years

=> 39,500-{7,300*4}

=> 39,500- 29,200

=> 10,300

B). Journal Entry

1. If it sold for 10,125

S.no	Account title and explanation	Debit($)	Credit($)
	Cash or Bank	10,125
	Accumulated depreciation	29,200
	Loss on sale of Assets	175
	Truck		39,500
	(to record assets sold for $10,125)

2. If it sold for 6,725

S.no	Account title and explanation	Debit($)	Credit($)
	Cash or Bank	6,725
	Accumulated depreciation	29,200
	Loss on sale of Assets	3,575
	Truck		39,500
	(to record assets sold for $10,125)

3.  Assume that Swann uses IFRS and sold the truck for $10,125. In addition, Swann had previously recorded a revaluation surplus related to this machine of $4,000

S.no	Account title and explanation	Debit($)	Credit($)
	Cash or Bank	10,125
	Accumulated depreciation	29,200
	Revaluation Reserve	3,575
	Truck		39,500
	(to record assets sold for $10,125)

Note: loss on sale of assets shall be changed to revaluation reserve if there is any surplus