Question

A truck costing $70,000 has accumulated depreciation of $51,000. The truck is scrapped for $0. The journal entry to record this transaction is to:

A. debit Accumulated Depreciation - Truck for $51,000, and credit Truck for $51,000.

B. debit Accumulated Depreciation - Truck for $51,000, debit Loss on Disposal $19,000, and credit Truck for $70,000.

C. debit Truck for $70,000, credit Accumulated Depreciation - Truck for $51,000 and credit Gain on Disposal for $19,000.

D. debit Truck for $51,000, debit Loss on Disposal for $19,000 and credit Accumulated Depreciation - Truck for $70,000.

Answer 1

The correct journal entry for scrapping a truck that cost $70,000 with accumulated depreciation of $51,000 and a scrap value of $0 is to debit Accumulated Depreciation - Truck for $51,000, debit Loss on Disposal for $19,000, and credit Truck for $70,000 (Option B).

Step-by-step explanation:

When a truck costing $70,000 has accumulated depreciation of $51,000 and is scrapped for $0, the correct journal entry to record this transaction is to remove the cost of the truck and the accumulated depreciation from the books and recognize any gain or loss on disposal. Since the truck is scrapped for $0, there is no salvage value to be considered, and a loss is incurred. The correct journal entry is to debit Accumulated Depreciation - Truck for $51,000, which removes the accumulated depreciation against the asset, debit Loss on Disposal for $19,000 to record the loss incurred through scrapping the truck (which is the difference between the book value of the truck and the scrap value), and credit Truck for $70,000, which removes the original cost of the truck from the books. Therefore, the correct option is B.

Here is the journal entry based on Option B:

• Debit Accumulated Depreciation - Truck for $51,000
• Debit Loss on Disposal for $19,000
• Credit Truck for $70,000