Fred Company sold a delivery truck on April 1, 2013. Swann had acquired the truc

Question

Fred Company sold a delivery truck on April 1, 2013. Swann had acquired the truck on January 1, 2009, for $47,450. At acquisition, Fred had estimated that the truck would have an estimated life of 10 years and a residual value of $4,450. At December 31, 2012, the truck had a book value of $30,250. Fred uses the straight-line method.

1a. Prepare any necessary journal entries to record the sale of the truck, assuming it sold for $30,775: For compound entries, if an amount box does not require an entry, leave it blank or enter "0".

1b. Prepare any necessary journal entries to record the sale of the truck, assuming it sold for $27,525: For compound entries, if an amount box does not require an entry, leave it blank or enter "0".

3. Assume that Fred uses IFRS and sold the truck for $30,775. In addition, Fred had previously recorded a revaluation surplus related to this machine of $3,700. What journal entries are required to record the sale? For compound entries, if an amount box does not require an entry, leave it blank or enter "0".

Explanation / Answer

1a. Sale of the truck for $30775 01/04/2013 Cash 30775 Accumulated Depreciation 18275 To Fixed Asset(Truck) 47450 To Gain on Sale of Asset 1600 1b. Sale of Truck for $27525 01/04/2013 Cash 27525 Accumulated Depreciation 18275 Loss on Sale of Asset 1650 To Fixed Asset 47450 3.Entry for Sale of Truck under IFRS if Truck was sold for $30775 Since there is a Revaluation Made in Value of assets of $3700(upward) the carrying cost ending 31 Dec will be $33950($30250+$3700) Useful Life of the asset at 31 Dec is 6 years, Thus Depreciation Annually is $33950/6= 5858.33 Depreciation upto April,1=5858.33/12*3=1464.5 Carrying Value of the asset on 1st April,13=33950-1464.5=$32485.5 01/04/2013 Cash 30775 Revaluation Surplus 3700 Depreciation on Fixed Asset(1st Jan to 31 March,13) 1464 To Net Value of Fixed Asset as on 31/12/2012 33950 To Gain on Sale of Asset 1989

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