SALE OF PLANT ASSET Perfect Auto Rentals sold one of its cars on January 1, 2009. Perfect had acquired the car on January 1, 2007, for $13,500. At acquisition Perfect assumed that the car would have an estimated life of three years and a residual value of $3,000. Assume that Perfect has recorded straight-line depreciation expense for 2007 and 2008.

Required:

. Prepare the journal entry to record the sale of the car assuming the car sold for:

a. $6,500 cash

b. $4,000 cash

c. $7,000 cash

. How should the gain or loss on the disposition (if any) be reported on the income statement?

Exercise