TransAmerica Truck Company is a large trucking company that operates throughout the United States. TransAmerica Truck Company uses the units-of-production (UOP) method to depreciate its trucks. The company trades in trucks often to keep driver morale high and to maximize fuel economy. Consider these facts about one Mack truck in the company’s feet: When acquired in 2014, the tractor-trailer rig cost $360,000 and was expected to remain in service for 10 years or 1,000,000 miles. Estimated residual value was $50,000. During 2014, the truck was driven 75,000 miles; during 2015, 108,000 miles; and during 2016, 135,000 miles. After 99,000 miles in 2017, the company traded in the Mack truck for a less-expensive Freightliner with a sticker price (fair market value) of $240,000. TransAmerica Truck Company paid cash of $20,000. Determine TransAmerica’s gain or loss on the transaction. Prepare the journal entry to record the trade-in of the old truck on the new one.
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