Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 77

Demonstrating the Effect of Book Value on Reporting an Asset Disposal
FedEx Corporation is the world's leading express-distribution company. In addition to the world's largest fleet of all-cargo aircraft, the company has more than 56,700 ground vehicles that pick up and deliver packages. Assume that FedEx sold a delivery truck for $16,000. FedEx had originally purchased the truck for $28,000, and had recorded depreciation for three years.
Required:
1. Calculate the amount of gain or loss on disposal, assuming that Accumulated Depreciation was: (a) $12,000, (b) $10,000, and (c)$ 15,000.
2. Using the following structure, indicate the effects (accounts, amounts, and + or - for the disposal of the truck, assuming that Accumulated Depreciation was: (a) $12,000, (b) $10,000, and (c) $15,000.

3. Based on the three preceding situation, explain how the amount of depreciation recorded up to the time of disposal affects the amount of gain or loss on disposal.
4. Prepare the journal entry to record the disposal of the truck, assuming that Accumulated Depreciation was: (a) $12,000, (b) $10,000 and (c) $15,000.