On January 1,2016,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 31,2018,Jacob Inc.sold the truck for $30,000.What amount of gain or loss should Jacob Inc.record on December 31,2018?

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the sale of the truck, we need to compare the book value (cost less accumulated depreciation) of the truck to the proceeds from the sale.

Book value on December 31, 2018:
Cost: $48,000
Less: Depreciation Expense (2016-2018): $15,000 [(($48,000 - $8,000) / 8) x 3]
Book Value: $33,000

Proceeds from the sale: $30,000

Gain or loss: Proceeds from sale - Book value
= $30,000 - $33,000
= ($3,000)

Since the proceeds from the sale are less than the book value, there is a loss of $3,000. Therefore, the correct answer is D.