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Gingerbread Corp had been depreciating a delivery truck for 3 years when it decided to sell the truck. The historical cost of the delivery truck was $40,000 with an estimated salvage value of $5,000 and a useful life of 7 years. The company had recorded $7,000 of depreciation expense every year for three years. The company sold the truck for $21,000. What is the gain or loss recorded on the sale of the truck.  a.Loss of $4,000 b.Gain of $2,000 c.Gain of $4,000 d.Loss of $2,000

Gingerbread Corp had been depreciating a delivery truck for 3 years when it decided to sell the truck. The historical cost of the delivery truck was $40,000 with an estimated salvage value of $5,000 and a useful life of 7 years. The company had recorded $7,000 of depreciation expense every year for three years. The company sold the truck for $21,000. What is the gain or loss recorded on the sale of the truck.  a.Loss of $4,000 b.Gain of $2,000 c.Gain of $4,000 d.Loss of $2,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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11. Gingerbread Corp had been depreciating a delivery truck for 3 years when it decided to sell the truck. The historical cost of the delivery truck was $40,000 with an estimated salvage value of $5,000 and a useful life of 7 years. The company had recorded $7,000 of depreciation expense every year for three years. The company sold the truck for $21,000. What is the gain or loss recorded on the sale of the truck. 

a.Loss of $4,000

b.Gain of $2,000

c.Gain of $4,000

d.Loss of $2,000

Expert Solution
Step 1

Given:

Cost of truck = $40,000

Depreciation = $7,000

 

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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