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On January 1, 2016, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. On December 31, 2018, Jacob Inc. sold the truck for $30,000. What amount of gain or loss should Jacob Inc. record on December 31, 2018?
A.Loss, $3,000.
B.Loss, $18,000.
C.Gain, $22,000.
D.Gain, $5,000.

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Answer:

Gain= $5000

Explanation:

Giving the following information:

On January 1, 2016,  commercial truck for $48,00

Straight-line depreciation method.

Useful life of eight years.

Residual value of $8,000.

On December 31, 2018, Jacob Inc. sold the truck for $30,000.

Annual depretiation= (purchase value-residual value)/useful years

Annual depretiation= (48000-8000)/8=5000

Accumulated depreciation= 5000*2 years= 10000

Book value at second year= purchase value-accumulated depreciation= 38000

Gain/Loss= Sell price- book value= 43000-38000= $5000

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