A truck that cost $24,000 and on which $18,000 of accumulated depreciation has been recorded was disposed of on January 1.Assume that the truck was traded for a similar truck having a price of $26,000,that an $3,600 trade-in was allowed,and that the balance was paid in cash.The amount of the gain or loss recognized on this transaction would be
A) a $2,400 loss.
B) a $2,400 gain.
C) no gain recognized.
D) no loss recognized.

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the disposal of the truck, we need to compare its book value (cost minus accumulated depreciation) with the total consideration received in the trade-in.

Book value = $24,000 - $18,000 = $6,000

Total consideration received = $26,000 - $3,600 = $22,400

Since the book value is less than the consideration received, a loss has been incurred. The amount of the loss is:

Loss = Book value - Total consideration received
     = $6,000 - $22,400
     = -$16,400 (negative indicates a loss)

Therefore, the answer is A) a $2,400 loss, which is the amount of the loss to be recognized after taking into account the trade-in allowance.

A Truck That Cost $24,000 and on Which $18,000 of Accumulated