On January 1, 2018, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. Assume the truck was totaled in an accident on December 31, 2019. What amount of gain or loss should Jacob Inc. record on December 31, 2019?

A. Loss, $38,000.

B. Loss, $18,000.

C. Loss, $3,000.

D. Gain, $5,000.

Question

Business

Aldo

11 August, 20:33

On January 1, 2018, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. Assume the truck was totaled in an accident on December 31, 2019. What amount of gain or loss should Jacob Inc. record on December 31, 2019?

A. Loss, $38,000.

B. Loss, $18,000.

C. Loss, $3,000.

D. Gain, $5,000.

+5

Answers (1)

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Ignacio Odom · Answer 1

The amount of loss should Jacob Inc. record on December 31, 2019 is $38,000

Explanation:

Truck Value = $48,000

Annual depreciation = ($48,000 - $8,000) / 8 = $40,000 / 8 = $5,000

First year (2018) = $40,000 - $5,000 = $35,000

Second year (2019) = $35,000 - $5,000 = $30,000

Loss = Truck Value (actual) + estimated residual value = $30,000 + $8,000 = $38,000