A truck costing $56,000 has accumulated depreciation of $50,000.The truck is scrapped for $0.The journal entry to record this transaction is to:

Question

Quizplus · Accepted Answer

When a fixed asset is disposed of, its cost and accumulated depreciation are removed from the books, and any gain or loss resulting from the disposal is recognized. Since the truck is being scrapped for $0, there is no gain or loss to recognize.

Thus, the journal entry to record the disposal of the truck would be:

Debit Accumulated Depreciation - Truck for $50,000
Debit Loss on Disposal for $6,000
Credit Truck for $56,000

Option C correctly reflects this journal entry, while the other options have errors. Option A incorrectly debits the truck for only the amount of accumulated depreciation, leaving the cost of the asset unaccounted for. Option B incorrectly credits the truck for the same amount as the debit to accumulated depreciation, resulting in a net zero effect on the books. Option D incorrectly includes a gain on disposal, which is not applicable in this scenario.

A Truck Costing $56,000 Has Accumulated Depreciation of $50,000