Answer:
D. Loss of $3,000
Explanation:
Cost = $48,000
Residual value = $8,000
Useful life = 8 years
Now,
Annual straight line depreciation = [tex]\frac{Cost-Residual Value}{Useful life}[/tex]
Annual straight line depreciation = [tex]\frac{48,000 - 8,000}{8}[/tex]
Annual straight line depreciation = [tex]\frac{40,000}{8}[/tex]
Annual straight line depreciation = $5,000
If Book value > Selling price then the firm incurred loss on sale of asset.
If book value < selling price then the firm incurred gain on sale of asset.
Here,
Book value (at the time of sale) = $33,000
Selling price = $30,000
Therefore, the company incurred loss on sale of asset.
Loss on sale of commercial truck = Book value (at the time of sale) - Selling price
Loss on sale of commercial truck = $30,000 - $30,000
Loss on sale of commercial truck = $3,000
Note:
Annual depreciation expense is transferred to the accumulated depreciation. Thus, accumulated depreciation is sum of depreciation expense charged over the useful life of the asset.
Depreciation table has been constructed to compute the accumulated depreciation on 31st December 2017.
The amount of loss that the company should record on December 31, 20X3 is Loss of $3,000
Given data
Cost = $48,000
Residual value = $8,000
Useful life = 8 years
Annual straight line depreciation = Cost - Salvage value / Useful Years
Annual straight line depreciation = $48,000 - $8,000 / 8
Annual straight line depreciation = $40,000 / 8
Annual straight line depreciation = $5,000
Hence, if the Book value > Selling price, then, the firm incurred loss on sale of asset but if the book value < selling price, then, the firm incurred gain on sale of asset.
Book value = $33,000 > Selling price = $30,000. Hence , the company incurred loss on sale of asset.
Loss on sale of commercial truck = Book value (at the time of sale) - Selling price
Loss on sale of commercial truck = $30,000 - $30,000
Loss on sale of commercial truck = $3,000
Hence, the amount of loss that the company should record on December 31, 20X3 is Loss of $3,000
Therefore, the Option D is correct.
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