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 31,2017,Jacob Inc.sold the truck for $43,000.What amount of gain or loss should Jacob Inc.record on December 31,2017?

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Quizplus · Accepted Answer

The depreciation expense per year is calculated as (Cost - Residual Value) / Useful Life = ($48,000 - $8,000) / 8 = $5,000 per year. After two years, the accumulated depreciation is $10,000, making the book value $38,000 ($48,000 - $10,000). Selling the truck for $43,000 results in a gain of $5,000 ($43,000 - $38,000).