Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on January 1, 2012, for $42,000. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $5,000. At December 31, 2015, the truck had a book value of $12,400.
Required:
1. | Prepare any necessary journal entries to record the sale of the
truck, assuming it sold for:
|
||||
2. | How should the gain or loss on disposal be reported on the income statement? |
1a) Journal entry
Date | account and explanation | Debit | Credit |
Apr 1 | Cash | 12000 | |
Accumulated depreciation-equipment (1850+29600) | 31450 | ||
Gain on sale of equipment | 1450 | ||
Equipment | 42000 | ||
(To record sale of equipment) |
1b) Journal entry
Date | account and explanation | Debit | Credit |
Apr 1 | Cash | 9000 | |
Accumulated depreciation-equipment (1850+29600) | 31450 | ||
Loss on sale of equipment | 1550 | ||
Equipment | 42000 | ||
(To record sale of equipment) |
2a) Reporting
Other revenue | |
Gain on sale of equipment | 1450 |
2b) Reporting
Other Expense | |
Loss on sale of equipment | 1550 |
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on...
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