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To illustrate the sale of an asset, let's return to our delivery truck example for Little King Sandwiches. Assume Little King uses straight- line
To illustrate the sale of an asset, let's return to our delivery truck example for Little King Sandwiches. Assume Little King uses straight- line depreciation and records the delivery truck in the Equipment account. The specific details are summarized again in Illustration 7-23. ILLUSTRATION 7-23 Data to Illustrate Long-Term Asset Disposals Original cost of the truck Estimated residual value Estimated service life Depreciation/year $40,000 $5,000 5 years $7,000 If we assume that Little King sells the delivery truck at the end of year 3 for $22,000, we can calculate the gain as $3,000. The gain is equal to the cash received of $22.000 less the truck's book value of $19,000, Illustration 7-24 shows the calculation. 91
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