ABO purchased a truck at the beginning of 2018 for $140,000.They sold the truck at the end of 2019 for $95,000.If the expected useful 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

Since the truck was sold for less than its book value, ABO will record a loss on the sale. The book value of the truck can be calculated as follows: 
Cost - Accumulated depreciation = Book value 
$140,000 - (($140,000 - $20,000)/6 x 2) = $60,000 
Since the truck was sold for $95,000, there is a loss of $35,000 ($95,000 - $60,000). Therefore, ABO would debit the Loss account for $35,000 and credit the Truck account for $140,000 and the Accumulated Depreciation account for $60,000. However, since the question only asks for the entry to record the sale of the truck, the correct answer is B, Debit Loss $5,000.

ABO Purchased a Truck at the Beginning of 2018 for $140,000.They