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 the end of 2013 using the straight- line method. First, Algernon had to update the depreciation prior to sale. Then Algernon recorded the sale transaction. What was the effect of that transaction on the net profit of the company?

Question

Quizplus · Accepted Answer

The truck was sold for $15,000, which is $9,000 more than its book value of $6,000 ($40,000 - $30,000 - $4,000). Therefore, the sale resulted in a gain of $9,000.

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