Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on...
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on January 1, 2012, for $42,000. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $5,000. At December 31, 2015, the truck had a book value of $12,400.
Required:
| 1. | Prepare any necessary journal entries to record the sale of the
truck, assuming it sold for:
|
||||
| 2. | How should the gain or loss on disposal be reported on the income statement? |
Homework Answers
1a) Journal entry
| Date | account and explanation | Debit | Credit |
| Apr 1 | Cash | 12000 | |
| Accumulated depreciation-equipment (1850+29600) | 31450 | ||
| Gain on sale of equipment | 1450 | ||
| Equipment | 42000 | ||
| (To record sale of equipment) |
1b) Journal entry
| Date | account and explanation | Debit | Credit |
| Apr 1 | Cash | 9000 | |
| Accumulated depreciation-equipment (1850+29600) | 31450 | ||
| Loss on sale of equipment | 1550 | ||
| Equipment | 42000 | ||
| (To record sale of equipment) |
2a) Reporting
| Other revenue | |
| Gain on sale of equipment | 1450 |
2b) Reporting
| Other Expense | |
| Loss on sale of equipment | 1550 |
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