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.Cash proceeds received
.B.Cash proceeds received and original cost of the truck
.C.Original cost of the truck.
D.Original cost of the truck minus the cash proceeds.

Answer 1

The net carrying amount of the composite asset accounts is decreased by the original cost of the truck minus the cash proceeds received.

Step-by-step explanation:

The correct answer is D.Original cost of the truck minus the cash proceeds.

When a company using the composite depreciation method retires one of its assets, the net carrying amount of the composite asset accounts is decreased by the original cost of the retired asset minus the cash proceeds received from its disposal. This is because the original cost represents the total cost of the asset, and the cash proceeds received offset a portion of that cost.

For example, if the original cost of the truck was $50,000 and the company received $5,000 in cash from the salvage company, the net carrying amount of the composite asset accounts would be decreased by $45,000 ($50,000 - $5,000).