Question

6. On the first day of its fiscal year, Scooter Co. purchased a computer system for a total cost of $50,000. The computer system is expected to have a useful life of 5 years with a residual value of $5,000. If the company uses the double-declining-balance method, its depreciation expense for the computer system in the first year will be: A. $9,000 B. $10,000 C. $18,000 D. $20,000 If a plant asset is sold and a loss is incurred, the entry to record the sale would include a: A. credit to Cash B. debit to Loss on Sale of Asset. C. debit to Plant Asset. D. credit to Accumulated Depreciation. Sky Co. purchased a truck for $90,000 on 1/1/18. The company depreciated the truck using the straight-line method over a 10 year useful life and a $6,000 residual value. Sky sold the truck on 1/1/21 for $68,700. Total accumulated depreciation on the truck on the date of the sale was $25,200. What gain or loss should be recorded on the sale? A. A gain of $3,900 B. A loss of $3,900 C. A loss of $21,300 D. A gain of $21,300

Answer 1

6) Double decline rate = 100/5*2 = 40%

Depreciation expense for first year = 50000*40% = 20000

So answer is d) $20000

7) Journal entry

Date	account and explanation	Debit	Credit
	Cash	XXX
	Accumulated depreciation	XXX
	Loss on sale of equipment	XXX
	Equipment		XXX

So answer is b) Debit to loss on sale of asset

8) Book value of truck = 90000-25200 = 64800

Gain on sale of assets = 68700-64800 = 3900

So answer is a) A gain of $3900