Question

A company using the composite depreciation method for its fleet of trucks, cars, and campers retired one of its trucks and received cash from a salvage company. The net carrying amount of these composite asset accounts was decreased by the

A.Original cost of the truck.
B.Original cost of the truck minus the cash proceeds.
C.Cash proceeds received

Answer 1

In the composite depreciation method, when an asset is retired, the net carrying amount is decreased by the original cost of the truck minus the cash proceeds from the sale.

Step-by-step explanation:

When a company using the composite depreciation method retires an asset like a truck, the net carrying amount of the composite asset account is typically decreased by the original cost of the truck minus the cash proceeds received from the salvage company. This adjustment reflects the disposal of the asset and adjusts the overall asset base used for the composite depreciation calculation. It does not merely reflect the original cost or just the cash proceeds, but the net effect of the disposal on the company's asset value.