FedEx Corporation is a global leader in express distribution. It has the world’s largest fleet of all-cargo aircraft and thousands of vehicles and trailers to pick up and deliver packages. Assume that FedEx sold a small delivery truck that had been used in the business for three years. The records of the company reflect the following:
Delivery truck ............ $ 38,000
Accumulated depreciation ........ 23,000
Required:
1. Prepare the journal entry to record the disposal of the truck and the related transaction effects, assuming that the sales price was
(a) $ 15,000
(b) $ 15,600
(c) $ 14,600.
2. Based on the three preceding situations, explain the effects of the disposal of an asset on financial statements.