Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the tru
ID: 2524092 • Letter: S
Question
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on January 1, 2012, for $39,500. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $4,000. At December 31, 2015, the truck had a book value of $11,100.
Required:
1. Prepare any necessary journal entries to record the sale of the truck, assuming it sold for: a. $11,025 b. $7,525 2. How should the gain or loss on disposal be reported on the income statement? 3. Assume that Swann uses IFRS and sold the truck for $11,025. In addition, Swann had previously recorded a revaluation surplus related to this machine of $5,000. What journal entries are required to record the sale?Explanation / Answer
Answer
If sold for $11,025
If sold for $7,525
Accounts titles
Debit
Credit
Debit
Credit
Cash
$ 11,025.00
$ 7,525.00
Accumulated Depreciation
$ 28,400.00
$ 28,400.00
Loss on disposal
$ 75.00
$ 3,575.00
Truck
$ 39,500.00
$ 39,500.00
(truck sold)
The Loss on Disposal is taken to the ‘’Other income and expenses” section in the multi step income statement. In single step income statement, Loss on disposal is shown under ‘’Expenses”.
Journal Entry in that case, would be:
If sold for $11,025
Accounts titles
Debit
Credit
Cash
$ 11,025.00
Accumulated Depreciation
$ 28,400.00
Revaluation Surplus
$ 75.00
Truck
$ 39,500.00
If sold for $11,025
If sold for $7,525
Accounts titles
Debit
Credit
Debit
Credit
Cash
$ 11,025.00
$ 7,525.00
Accumulated Depreciation
$ 28,400.00
$ 28,400.00
Loss on disposal
$ 75.00
$ 3,575.00
Truck
$ 39,500.00
$ 39,500.00
(truck sold)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.