On 1 September 2014, Algernon Company sold a truck for $15 000 cash. The truck was originally purchased for $40 000, had an estimated residual value of $4 000 and an estimated life of 6 years. Algernon had recorded depreciation of $30 000 through to the end of 2013 using the straight- line method. Algernon had to update the depreciation prior to sale. After updating the depreciation, how much was the total accumulated depreciation on the truck?

Question

Quizplus · Accepted Answer

The truck was depreciated for 5 years (2014 is the 6th year). Annual depreciation is ($40,000 - $4,000) / 6 = $6,000. By the end of 2013, $30,000 was recorded. For 2014, $6,000/12 = $500 per month. For 8 months (Jan-Aug 2014), depreciation is $500 * 8 = $4,000. Total accumulated depreciation = $30,000 + $4,000 = $34,000.

On 1 September 2014, Algernon Company Sold a Truck for $15