one accounting question...help!?

Question

8. Smash-n-Crash Transportation Company sold an old truck on December 31, 2007, for $18,400 cash. The following data was available when the truck sold:


Acquisition cost $75,000
Estimated residual value at time of acquisition 8,000
Accumulated depreciation on December 31, 2007 after adjustment 53,600

When this transaction is recorded, it should include a

a. debit of $3,000 to Loss on Disposal.
b. credit of $21,400 to the Truck account.
c. credit of $3,000 to Gain on Disposal.
d. credit of $5,000 to Gain on Disposal.


please tell me the answer and brifely explain why....thank you!!

Answer 1

You cannot credt the truck account by 21,400, since you did not receive that amount.

I am leaning towards a., since the truck was sold for less than the the value. You need to credit the truck account for 18,400. The account for Loss on Disposal is debited, since the you are adding a loss.

If you were to gain on the sale, then you would credit the account.