On July 9, 2019, a truck was purchased for $27,000 with a $2,000 salvage value, is expected to last five years & 40,000 miles. Use the partial year convention to depreciate fractional periods. Note: you may not require all the given information to solve.
The book value of the truck under straight-line at December 31, 2020 after all adjusting entries, will be:
2019...................-250
2020....................-500
27,000-250-500=26,250
2). If the truck was sold on December 31, 2020 for $17,000, compute the gain or loss on the sale.
2020 book value 26,250-17,000=
-9250
Cost price of truck = $27,000
Salvage value = $2,000
Useful life = 5 years
Annual depreciation = (Cost price - Salvage value)/Useful life
= (27,000 - 2,000)/5
= 25,000/5
= $5,000
For the year 2019, depreciation will be charged for 6 months.
Depreciation expense for 2019 = 5,000 x 6/12
= $2,500
The book value of the truck under straight-line at December 31, 2020 after all adjusting entries, will be = Cost price - Accumulated depreciation
= 27,000 - (2,500 + 5,000)
= 27,000 - 7,500
= $19,500
Truck was sold on December 31, 2020 for $17,000
Loss on sale of truck = Book value of the truck at December 31, 2020 - Sale price of truck
= 19,500 - 17,000
= $2,500
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On July 9, 2019, a truck was purchased for $27,000 with a $2,000 salvage value, is...
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