A truck that cost $21,000 and on which $10,000 of accumulated depreciation has been recorded was disposed of for $9,000 cash. The entry to record this event would include a
A) gain of $2,000.
B) loss of $2,000.
C) credit to the Truck account for $11,000.
D) credit to Accumulated Depreciation for $10,000.

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the disposal of an asset, we need to subtract the cash received from the book value of the asset. The book value is calculated as the original cost of the asset minus accumulated depreciation.

Book value = $21,000 - $10,000 = $11,000
Cash received = $9,000

Since the cash received is less than the book value, there is a loss on the disposal of the truck. The amount of the loss is:

Loss = Book value - Cash received = $11,000 - $9,000 = $2,000

Therefore, the entry to record this event would include a loss of $2,000. The other options are incorrect because there is no gain, the credit to the Truck account should be for $21,000 (the original cost), and the credit to Accumulated Depreciation should be for $10,000 (the total depreciation recorded up to the date of disposal).

A Truck That Cost $21,000 and on Which $10,000 of Accumulated