Question

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MoveIt Corporation is the world’s leading express-distribution company. In addition to its 643 aircraft, the company has more than 57,000 ground vehicles that pick up and deliver packages. Assume that MoveIt sold a delivery truck for $6,000. MoveIt had originally purchased the truck for $10,000 and had recorded depreciation for three years.

Required:

1. Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was (a) $4,000, (b) $3,000, and (c) $5,000. (Select "None" if there is no Gain or Loss.)

2. Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was (a) $4,000, (b) $3,000, and (c) $5,000. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

1. A) Cost = 10,000

Accumulated Depreciation = 4,000

Book value = 10,000 - 4,000

Book value = $ 6,000

Sale proceeds = $ 6,000

So the truck having book value of $ 6,000 is sold for the same value as a result there will be no gain or loss on sale.

Gain or loss = None.

B) Book value = Cost - Accumulated Depreciation

Book value = 10,000 - 3,000

Book value = $ 7,000

Sale proceeds = $ 6,000

So the truck having book value of $ 7,000 is sold for $ 6,000 which means that there is a loss of $ 1,000 on sale.

Loss on sale = - $ 1,000

C) Book value = 10,000 - 5,000

Book value = $ 5,000

Sale proceeds = $ 6,000

The truck is sold above the book value which means that there is a gain of $ 1,000 on sale.

Gain on sale = $ 1,000.

2. Journal entries.

Date	Accounts	Debit	Credit
A	Cash	$ 6,000
	Accumulated Depreciation	$ 4,000
	To Truck(asset)		$ 10,000
B	Cash	$ 6,000
	Accumulated Depreciation	$ 3,000
	Loss on sale	$ 1,000
	To truck		$ 10,000
C	Cash	$ 6,000
	Accumulated Depreciation	$ 5,000
	To gain on sale		$ 1,000
	To truck		$ 10,000

SUMMARY:

All requirements have been provided.