Final answer:
The correct accounting for discarding a truck with a cost of $75,000 and accumulated depreciation of $65,000 is to recognize a loss of $10,000. No additional depreciation is recorded since the asset and its related accumulated depreciation are removed from the books.
Step-by-step explanation:
In accounting, when a fixed asset, such as a truck, is disposed of, it is necessary to remove the asset and the related accumulated depreciation from the books. If the truck originally cost $75,000 and accumulated depreciation of $65,000 has been recorded, discarding it as having no value would involve a couple of steps. The first step is to remove the truck's cost and the accumulated depreciation from the balance sheet. The truck's cost will decrease the assets side, and the elimination of accumulated depreciation will decrease the equity side on the balance sheet.
Since the truck has no value, no cash or salvage value is realized upon disposing of the truck. Therefore, the company should recognize a loss of $10,000, which is the difference between the truck's cost and its accumulated depreciation (i.e., $75,000 - $65,000). This loss reflects the fact that the full cost of the truck was not recovered through use or sale.
- The correct response to the initial question is (a) loss of $10,000. Recording the increase to Accumulated Depreciation isn't necessary since it's already been recorded over time through previous depreciation expenses. The asset and its related accumulated depreciation are simply removed from the books.