ABO purchased a truck at the beginning of 2012 for $140,000.They sold the truck at the end of 2013 for $95,000.If the expected life of the truck was six years with a residual value of $20,000 and ABO uses straight-line depreciation,which of the following is true regarding the entry to record the sale of the truck?

Question

Quizplus · Accepted Answer

The journal entry to record the sale of the truck would be:
Debit Cash $95,000
Debit Loss on sale of truck $5,000 ($140,000 - $20,000)/6 years x 2 years = $20,000 depreciation expense accumulated over 2 years, so the book value of the truck at the time of sale was $115,000 ($140,000 - $20,000 - $20,000), which is higher than the sale price of $95,000, resulting in a loss of $5,000 ($115,000 - $95,000).
Credit Truck $140,000
Credit Accumulated Depreciation $40,000 ($20,000 x 2 years)
Therefore, the correct choice is B, debit Loss $5,000.

ABO Purchased a Truck at the Beginning of 2012 for $140,000.They