Question

On January 1, 2018, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. Assume the truck was totaled in an accident on December 31, 2019. What amount of gain or loss should Jacob Inc. record on December 31, 2019?

A.Loss, $38,000.
B.Loss, $18,000.
C.Loss, $3,000.
D.Gain, $5,000.

Answer 1

A.Loss, $38,000.

Step-by-step explanation:

48,000 acquisition valie 8,000 salvage value

subject to depreciaiton 40,000

useful life 8 years

depreciaiton per year:

(40,000) / 8 = 5,000

At december 2019

It has 2 complete year depreciation:

5,000 x 2 = 10,000

book value: 48,000 - 10,000 = 38,000

This amount will be declared as loss as the truck was totaled in he accident.