Question

MoveIt Corporation is the world’s leading express-distribution company. In addition to the world’s largest fleet of all-cargo aircraft, the company has more than 54,000 ground vehicles that pick up and deliver packages. Assume that MoveIt sold a delivery truck for $26,000. MoveIt had originally purchased the truck for $43,000 and had recorded depreciation for three years.

1.Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was

(a) $17,000,
(b) $12,000, and
(c) $19,000

2.Using the following structure, indicate the effects on disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000.

3.Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was (a) $17,000, (b) $12,000, and (c) $19,000.

Answer 1

The gain or loss on disposal is calculated by subtracting the net book value (cost less accumulated depreciation) from the sale price of the asset. Depending on the amount of accumulated depreciation, the MoveIt Corporation would record a break-even, a loss, or a gain on the sale of its delivery truck.

Step-by-step explanation:

Calculating Gain or Loss on Disposal:

To calculate the gain or loss on the disposal of the delivery truck, we need to consider the truck's original cost, the accumulated depreciation, and the sale price. The formula for calculating gain or loss is:

Sale Price - (Original Cost - Accumulated Depreciation) = Gain or Loss

1. For (a) $17,000 in accumulated depreciation: $26,000 - ($43,000 - $17,000) = $0 (no gain or loss)
2. For (b) $12,000 in accumulated depreciation: $26,000 - ($43,000 - $12,000) = -$5,000 (loss)
3. For (c) $19,000 in accumulated depreciation: $26,000 - ($43,000 - $19,000) = $2,000 (gain)

Journal Entry for Disposal of the Truck:

The journal entry varies based on the accumulated depreciation and whether there was a gain or loss:

• For (a) $17,000 accumulated depreciation, the entry would balance with no gain or loss accounted for.
• For (b) $12,000 accumulated depreciation, the loss of $5,000 would be recorded.
• For (c) $19,000 accumulated depreciation, a gain of $2,000 would be recorded.