On January 1, 2012, the Von Schoppe Company purchased a delivery truck for $20,0

Question

On January 1, 2012, the Von Schoppe Company purchased a delivery truck for $20,000. The truck had an estimated useful life of six years and a salvage value of $2,000. On September 30, 2014, Von Schoppe sold the truck for $13,000. Von Schoppe uses the straight-line method of depreciation and records depreciation on December 31.

a. Calculate the gain or loss on the disposal of the delivery truck.

b. Prepare all entries necessary on September 30, 2014. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".

Explanation / Answer

a) Written down value on 31 December 2013 = 20000-(20000-2000)/6*2= $ 14000

Loss on disposal = Written down value - sales amount = 14000-13000= $1000

b) Journal entry

Cash debit 13000

Accumulated depreciation debit 6000

Loss on sale debit 1000

Delivery truck credit 20000

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