Question

Required information [The following information applies to the questions displayed below.] Movelt Corporation is the world's leading express-distribution company. In addition to its 643 aircraft, the company has more than 57,000 ground vehicles that pick up and deliver packages. Assume that Movelt sold a delivery truck for $14,000. Movelt had originally purchased the truck for $23,000 and had recorded depreciation for three years. 2. Using the following structure, indicate the effects (accounts, amounts, and + for increase and for decrease) of the disposal of the truck, assuming that Accumulated Depreciation was (a) $9,000. (b) $7,000, and (c) $15,000. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.) Assets Liabilities + Stockholders' Equity

Answer 1

Answer:

	Assets	Liabilities	Stake holders enqity
a)	Truck will decrease by $23000	accumulated depreciation will reduce by $14000	No effect
	Cash will increase by $14000
b)	Truck will decrease by $23000	accumulated depreciation will reduce by $7000	Reduce by $2000
	Cash will increase by $14000
c)	Truck will decrease by $23000	accumulated depreciation will reduce by $8000	Reserves will reduce by $6000
	Cash will increase by $14000

Working Notes:

cost of truck = 23000
Accumulated depreciation = 9000
written down value = cost - accumulated depreciation = 23000-9000 =14000
Sale value = 14000
Gain on sale truck = sale value-written down value = 14000-14000 = 0
Accumulated depreciation = $7000
Written down value = cost-accumulated depreciation = 23000-7000 = 16000
Gain on sale of truck = 14000-16000 = 2000
Cost of truck = 23000
Accumulated depreciation = $15,000
Written down value = cost-accumulated depreciation =23000-15000 = 8000
Gain on sale of truck = 14000-8000 = 6000