Sears Canada Inc. has developed a consolidated distribution network in Vaughan, Ontario, and in Calgary, Alberta. As part of its distribution service, Sears trucks transport inventory to its various department, furniture, appliance, automotive, and outlet stores, as well as to individual customers. Assume that Sears sold a small delivery truck that had been used in the business for three years. The records of the company reflect the following:

Required:
1. Prepare the journal entry to record the disposal of the truck and the related transaction effects, assuming that the sales price was

(a) \(\$ 4,000\),

(b) \(\$ 4,600\), or

(c) \(\$ 3,600\).
2. Based on the three preceding situations, explain the effects of the disposal of an asset on financial statements.

Transcribed Image Text:

Delivery truck $28,000 Accumulated depreciation 24,000