Stone Company purchased a tractor at a cost of $180,000. The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years, or 10,000 hours of operation. The tractor was purchased on January 1, Year 1 and was used 2,400 hours in Year 1 and 2,100 hours in Year 2. On January 1, Year 3, the company decided to sell the tractor for $70,000. Stone uses the units-of-production method to account for the depreciation on the tractor. Based on this information, the entry to record the sale of the tractor will show: A loss of $38,000 No gain or loss on the sale A loss of $70,000 A gain of $70,000
Stone Company purchased a tractor at a cost of $180,000. The tractor has an estimated salvage value of $20,000 and an estimated life of 8 years, or 10,000 hours of operation. The tractor was purchased on January 1, Year 1 and was used 2,400 hours in Year 1 and 2,100 hours in Year 2. On January 1, Year 3, the company decided to sell the tractor for $70,000. Stone uses the units-of-production method to account for the depreciation on the tractor. Based on this information, the entry to record the sale of the tractor will show: A loss of $38,000 No gain or loss on the sale A loss of $70,000 A gain of $70,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Stone Company purchased a tractor at a
cost of $180,000. The tractor has an
estimated salvage value of $20,000 and an
estimated life of 8 years, or 10,000 hours of
operation. The tractor was purchased on
January 1, Year 1 and was used 2,400
hours in Year 1 and 2,100 hours in Year 2.
On January 1, Year 3, the company decided
to sell the tractor for $70,000. Stone uses
the units-of-production method to account
for the depreciation on the tractor.
Based on this information, the entry to
record the sale of the tractor will show:
A loss of $38,000
No gain or loss on the sale
A loss of $70,000
A gain of $70,000
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