E7-24A. (Learning Objectives 1, 2, 3: Measuring a PPE’s cost; using UOP depreciation;

trading in a used asset) Prompt Truck Company is a large trucking company that operates throughout the United States. Prompt Truck Company uses the units-of-production (UOP)

method to depreciate its trucks.

Prompt Truck Company trades in trucks often to keep driver morale high and to maximize fuel economy. Consider these facts about one Mack truck in the company’s fleet. When acquired in 20X6, the tractor-trailer rig cost $390,000 and was expected to remain in service for 10 years or 1,000,000 miles. Estimated residual value was $100,000. During 20X6, the truck was driven 78,000 miles; during 20X7, 118,000 miles; and during 20X8, 156,000 miles. After 38,000 miles in 20X9, the company traded in the Mack truck for a less expensive Freightliner with a sticker price of $300,000. Prompt Truck Company paid cash of $27,000. Determine Prompt’s gain or loss on the transaction. Prepare the journal entry to record the trade-in of the old truck for the new one.