Cook Wrecker Co. purchased a truck on January 1, 2010, for $37,000. In addition, Cook paid sales

Question:

Cook Wrecker Co. purchased a truck on January 1, 2010, for $37,000. In addition, Cook paid sales tax and title fees of $2,000 for the truck. The truck is expected to have a four-year life and a salvage value of $7,000.

Required

a. Using the straight-line method, compute the depreciation expense for 2010 and 2011.

b. Assume the truck was sold on January 1, 2013, for $15,000. Determine the amount of gain or loss that would be recognized on the asset disposal.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...