Question

Assume Smart Touch Learning sells a van for $ 1000 with a cost of $ 17000 and​ up-to-date accumulated depreciation of $ 15000. The journal entry to record the disposal of the van would include

Answer 1

To record the disposal of a van, the journal entry includes debiting cash for the sale price, debiting accumulated depreciation to remove it, crediting the asset account for its cost, and recording a loss if the van is sold for less than its book value.

Step-by-step explanation:

When Smart Touch Learning sells their van, they need to remove the van's cost and its associated accumulated depreciation from their books, and to record the cash received and any gain or loss on the sale. The van's original cost is $17,000, and it has accumulated depreciation of $15,000. When they sell it for $1,000, they are selling it for less than the amount it's valued at on the books ($2,000 net book value).

The journal entry to record this transaction would be:

• Debit Cash $1,000 (to record the receipt of cash)
• Debit Accumulated Depreciation $15,000 (to remove the accumulated depreciation from the books)
• Credit Van (asset account) $17,000 (to remove the cost of the van from the books)
• Debit Loss on Sale of Van $1,000 (the difference between the net book value and the cash received, which is a loss)

This entry removes the van and its accumulated depreciation from the balance sheet and records the cash received and the loss on disposal of the asset.