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Assume that a company sold a delivery van that had been used in the business for three

Question:

Assume that a company sold a delivery van that had been used in the business for three years. Records of the company related to the van reflect the following:
Delivery van cost .......... $42,500
Accumulated Depreciation ....... 25,200

Required:
1. Prepare the required journal entry to record disposal of the van, assuming the following sales amounts for cash:
a. $17,300
b. $20,500
c. $15,800
2. Based on the situation above, explain the effects of the disposal of an asset on the company’s financial statements.

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1 Date Account titlesDescription Debits Credits a Cash 17300 Accumulated Depreciation 25200 Delivery ...View the full answer


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Ehsan Mahmood
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Financial Accounting

Financial Accounting

ISBN: 978-1259103285

5th Canadian edition

Authors: Robert Libby, Patricia Libby, Daniel Short, George Kanaan, M

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Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.

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