Question

highway resort buys a luxury suv for $100,000, depreciates $10,000 per year over the following 10 years. at that time, the suv is fully depreciated, the resort gives it away. based on this information, the resort has to produce the following journal entry of the disposal of the suv:

Answer 1

To record the disposal of the fully depreciated luxury SUV, a journal entry is made debiting Accumulated Depreciation - SUV and crediting Luxury SUV for the same amount, which is $100,000, to remove the asset from the company's balance sheet.

Step-by-step explanation:

The subject of this question is the journal entry for the disposal of a luxury SUV that has been fully depreciated over a 10-year period. When the SUV, initially costing $100,000, is fully depreciated by $10,000 per year, its book value becomes zero. At the time of disposal, since the vehicle is given away and no cash or other assets are received, the journal entry would eliminate the asset from the books and recognize any remaining accumulated depreciation.

The journal entry to record the disposal would be:

Debit Accumulated Depreciation - SUV for $100,000

Credit Luxury SUV for $100,000

This entry removes both the SUV's cost and its related accumulated depreciation from the company's balance sheet, reflecting that the asset is no longer owned by the company and has no remaining book value.