A company sold a delivery truck for $18,000 cash.The truck cost $47,500 and had accumulated depreciation of $36,000 as of the date of sale.The entry to record the sale would include

Question

Quizplus · Accepted Answer

The sale of a fixed asset results in a gain or loss. To determine the gain or loss, you must compare the selling price to the carrying amount of the asset (i.e., cost less accumulated depreciation). 
Carrying amount = Cost - Accumulated depreciation 
Carrying amount = $47,500 - $36,000
Carrying amount = $11,500

Since the selling price is more than the carrying amount, there is a gain on sale. 
Gain on sale = Selling price - Carrying amount 
Gain on sale = $18,000 - $11,500 
Gain on sale = $6,500

Therefore, the entry to record the sale would include a credit to Delivery Truck for $47,500, a debit to Accumulated Depreciation for $36,000, a debit to Loss on Sale of Truck for $6,500, and a debit to Cash for $18,000.
Option D is the correct answer because there is a gain on the sale of the truck.

A Company Sold a Delivery Truck for $18,000 Cash