Bella’s Pizza Company purchased a delivery van in early 20X1 for $55,000 and depreciated it on a straight-line basis over its useful life of 5 years. Estimated residual value was $5,000. The company sold the van in early 20X4 after recognizing 3 years of depreciation.
1. Suppose Bella’s Pizza received $27,000 cash for the van. Compute the gain or loss on the sale. Prepare the journal entry for the sale of the van.
2. Suppose Bella’s Pizza received $14,000 cash for the van. Compute the gain or loss on the sale. Prepare the journal entry for the sale of the van.