Question

A truck costing $12,300, which has Accumulated Depreciation of $9,030, was sold for $2,030 cash. The entry to record this event would include a:

a. credit to Accumulated Depreciation for $9,030.

b. credit to the Vehicles account for $3,270.

c. loss of $1,240.

d. gain of $1,240.

Answer 1

The correct accounting entry to record the sale of the truck includes crediting the Accumulated Depreciation account, debiting cash, debiting loss, and crediting the Vehicles account, which results in a recorded loss of $1,240.

Step-by-step explanation:

The student has asked about the accounting entry to record the sale of a truck which had a cost of $12,300, Accumulated Depreciation of $9,030, and was sold for $2,030 cash. The analysis of this transaction is as follows:

• The carrying amount of the truck is the cost minus Accumulated Depreciation, which is $12,300 - $9,030 = $3,270.
• Since the truck was sold for $2,030 and the carrying amount is $3,270, the company will recognize a loss of $3,270 - $2,030 = $1,240.

Therefore, the correct entry includes:

1. Credit to Accumulated Depreciation for $9,030.
2. Debit to the cash account for $2,030.
3. Debit to the loss account for $1,240.
4. Credit to the Vehicles account for $12,300.

Hence, the correct answer is a loss of $1,240 (option c).