Question

Computing Depreciation, Asset Book Value, and Gain or Loss on Asset Sale Sloan Company uses its own executive charter plane that originally cost $800,000. It has recorded straight line depreciation on the plane for six full years, with a $80,000 expected salvage value at the end of its estimated 10 year useful life. Sloan disposes of the plane at the end of the sixth year a. At the disposal date, what is the (1) accumulated depreciation and (2) net book value of the plane? uso (2) O b. Prepare a journal entry to record the disposal of the plane assuming that the sales price is 1. Cash equal to the book value of the plane. Description Debit Credit

Answer 1

Original cost	$   800,000
Less: Salvage value	$   (80,000)
Depreciable value	$   720,000
Life of asset	10 Years
Depreciation per year ($720,000/10)	$     72,000
Accumulated depreciation at the end of sixth year ($72,000*6)	$   432,000
Book value at the end of sixth year ($800,000-$432,000)	$   368,000

1.

Description	Debit	Credit
Cash	$   368,000
Accumulated depreciation	$   432,000
Airplane		$   800,000

2.

Description	Debit	Credit
Cash	$   195,000
Accumulated depreciation	$   432,000
Loss on sale of assets	$   173,000
Airplane		$   800,000

3.

Description	Debit	Credit
Cash	$   600,000
Accumulated depreciation	$   432,000
Gain on sale of assets		$   232,000
Airplane		$   800,000

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