Question

Font Paragraph Styles 2. 3 4 5. + 6 On January 1, 2016, Tremblay Transport purchased a $160,000 truck Tremblay plans on driving the truck for 400,000 kilometers. Expected residual value for the truck is $40,000 On June 30, 2019, after having been driven 180 000 kilometers, the truck had an accident on the highway and Tremblay had to sell it for $42,000 cash. REQUIRED : Record the disposal of the truck on June 30, 2019, assuming the amortization expense for the truck to decembre 31, 2018 has already been recorded using the unit-of-production method and that the truck has been driven 20 000 km since then.

Answer 1

Cost of truck = $160,000

Residual value = $40,000

Useful life = 400,000 KM

Depreciation expense per Km = (Cost of truck - Residual value)/Useful life

= (160,000 - 40,000)/400,000

= $0.30

Km rum till June 30, 2019 = 180,000

Accumulated depreciation expense = Depreciation expense per Km x Km rum till June 30, 2019

= 0.30 x 180,000

= $54,000

Book value of truck on June 30, 2019 = Cost of truck - Accumulated depreciation expense

= 160,000 - 54,000

= $106,000

Sale price of truck = $42,000

Loss on sale of truck = Book value of truck on June 30, 2019 - Sale price of truck

= 106,000 - 42,000

= $64,000

Km driven in the year 2019 = 20,000

Depreciation expense for the year 2019 = Depreciation expense per Km x Km driven in the year 2019

= 0.30 x 20,000

= $6,000

Journal

Date	General journal	Debit	Credit
June 30, 2019	Depreciation expense	6,000
	Accumulated depreciation - Truck		6,000
June 30, 2019	Cash	42,000
	Accumulated depreciation - Truck	54,000
	Loss on sale of truck	64,000
	Truck		160,000