Rupert Company purchased a delivery van on January 1, Year 1 for $45,000. Rupert uses the straight-line method for the asset, which has a five-year estimated useful life and a salvage value estimated at $9,000. On January 1, Year 3, the asset was sold for $33,300 cash. Indicate whether each of the following items related to Rupert Company is true or false.________ a) Annual depreciation for Rupert's equipment was $9,000.________ b) Accumulated depreciation at end of Year 2 was $14,400.________ c) Book value at end of Year 2 was $30,600.________ d) On the date of the sale, Rupert will record a loss of $2,400.________ e) A gain or loss on the sale of a plant asset is reported on the balance sheet.
What will be an ideal response?
a) F b) T c) T d) F e) F
a) This is false. Annual depreciation = ($45,000 ? $9,000 salvage) ÷ 5 years = $7,200
b) This is true. Accumulated depreciation at end of Year 2 = 2 years × $7,200 annual depreciation = $14,400
c) This is true. Book value at end of Year 2 = Cost of $45,000 cost ? Accumulated depreciation of $14,400 = $30,600
d) This is false. Proceeds from sale of $33,300 price ? Book value of $30,600 = Gain on sale of $2,700
e) This is false. Gains and losses are reported on the income statement (rather than on the balance sheet).
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