Disposal of Plant Asset Canyon Company has a used delivery truck that originally

Question

Disposal of Plant Asset

Canyon Company has a used delivery truck that originally cost $27,200. Straight-line depreciation on the truck has been recorded for three years, with a $2,000 expected salvage value at the end of its estimated six-year useful life. The last depreciation entry was made at the end of the third year. Four months into the fourth year, Canyon disposes of the truck.

Required

Prepare journal entries to record:
a. Depreciation expense to the date of disposal.
b. Sale of the truck for cash at its book value.
c. Sale of the truck for $15,000 cash.
d. Sale of the truck for $12,000 cash.
e. Theft of the truck. Canyon carries no insurance for theft.

General Journal Reference Description Debit Credit a. Depreciation Expense - Truck Answer Answer Accumulated Depreciation - Truck Answer Answer To record depreciation expense for 4 months.
b. Cash Answer Answer Accumulated Depreciation - Truck Answer Answer Truck Answer Answer To record sale of truck.
c. Cash Answer Answer Accumulated Depreciation - Truck Answer Answer Truck Answer Answer Gain on Sale of Plant Assets Answer Answer To record sale of truck.
d. Cash Answer Answer Loss on Sale of Plant Assets Answer Answer Accumulated Depreciation - Truck Answer Answer Truck Answer Answer To record sale of truck.
e. Theft Loss Answer Answer Accumulated Depreciation - Truck Answer Answer Truck Answer Answer To record theft of uninsured truck.

Explanation / Answer

Solution:

General Journal Reference Description Debit Credit a. Depreciation Expense - Truck Dr ($25,200/6*4/12) $1,400.00           To Accumulated Depreciation - Truck $1,400.00 (To record depreciation expense for 4 months.) b. Cash Dr $13,200.00 Accumulated Depreciation - Truck Dr $14,000.00           To Truck $27,200.00 (To record sale of truck.) c. Cash Dr $15,000.00 Accumulated Depreciation - Truck Dr $14,000.00           To Truck $27,200.00           To Gain on sale of plant assets $1,800.00 (To record sale of truck.) d. Cash Dr $12,000.00 Loss on Sale of Plant Assets Dr $1,200.00 Accumulated Depreciation - Truck Dr $14,000.00           To Truck $27,200.00 (To record sale of truck.) e. Theft Loss Dr $13,200.00 Accumulated Depreciation - Truck Dr $14,000.00           To Truck $27,200.00 (To record theft of uninsured truck.)

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