Calculate depreciation under alternative methods and account for disposal of an asset. (LO 2, 5) Perfect Heating

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Calculate depreciation under alternative methods and account for disposal of an asset. (LO 2, 5)

Perfect Heating and Air purchased a truck 3 years ago for $\$ 50,000$. The company expects the truck to have a useful life of 5 years with no salvage value. The company has taken three full years of depreciation expense.

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a. Assume that the company uses straight-line depreciation. If the truck is sold for $\$ 25,000$, will there be a gain or loss on the sale? If so, how much? How will the sale affect the financial statements for the year?

b. Assume that the company uses double-declining balance depreciation. If the truck is sold for $\$ 15,000$, will there be a gain or loss on the sale? If so, how much? How will the sale affect the financial statements for the year?

c. Assume the company uses straight-line depreciation and sells the truck for $\$ 20,000$. Would there be a gain or loss on the sale? How would that change if the company had been using double-declining balance depreciation?

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