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:
Cash 95,000
Accumulated Depreciation 40,000*
Loss 5,000
Equipment 140,000
*[($140,000 - $20,000)/6 years] = $20,000 per year x 2 years = $40,000.

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