Hobart Co. purchases a truck on 1 July 20X7 for €200,000. The truck should last for five years and then could be sold for €40,000. The financial statements are made up to the year ended 31 December, with depreciation calculated monthly from the date of acquisition.

(a) Assuming straight-line depreciation, show the accounting entries relating to vehicles and depreciation of them for 20X7 and 20X8, identifying also the balance sheet figure for vehicles.

(b) On 31 December 20X9 the truck is sold for €110,000. How is the income statement affected?