Financial Accounting: Gain or Loss?

Question

A trucking company sold its fleet of trucks for $55,600. The trucks originally cost $1,436,000 and had Accumulated Depreciation of $1,275,000 recorded through the date of disposal. What gain or loss did the trucking company record when it sold the fleet of trucks?

Loss of $55,600.
Gain of $55,600.
Gain of $105,400.
Loss of $105,400.

Answer 1

To determine the gain or loss on disposal, compare the sales price to the book value of the asset sold. 

 

Book Value = Cost - Accumulated Depreciation

 

Book Value = 1,436,000 -1,275,000

 

Book Value =161,000

 

Sales Price - Book Value = Gain on Disposal (If the number is negative then it is a Loss on Disposal)

 

55,600 - 161,000= -105,400  since this is negative, this is a Loss