Question

During the current year, Vann County's motor pool internal service fund sold two vehicles for $5,000. The vehicles had a cost of $6,000 and a carrying value of $4,000. How should Vann County's motor pool internal service fund report this transaction in its fund financial statements?

Answer 1

Answer:

$1,000 gain

Explanation:

The cost basis for the vehicles was $6,000 and the carrying cost was $4,000 = $2,000 depreciation

If they sold the vehicles for $5,000, then they had a $1,000 gain (= $5,000 - $4,000). The journal entries should be as following:

Dr Cash account 5,000

Dr Accumulated Depreciation account 2,000

Cr Motor Vehicles account 6,000

Cr Gain on Motor Vehicles 1,000