On January 1, 2010, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. On December 31, 2012, Jacob Inc. sold the truck for $30,000. What amount of gain or loss should Jacob Inc. record on December 31, 2012?

Question

Quizplus · Accepted Answer

($48,000 - $8,000)/8 = depreciation of $5,000 per year. After three years, the book value would be [$48,000 - ($5,000 x 3 years)] = $33,000. The truck was sold for $30,000 or a $3,000 loss below book value.