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, 2017, jacob inc. sold the truck for $43,000. what amount of gain or loss should jacob inc. record on december 31, 2017?
a. gain, $22,000.
b. gain, $5,000.
c. loss, $3,000.
d. loss, $18,000.

Correct option is (B)

Explanation:

Given:

Purchase price as on January, 1, 2016 is $48,000. Salvage value is $8,000 and estimated life is 8 years.

Depreciation method used is straight line method. Calculation of annual depreciation:

                                          = $5,000

Value of truck as on December 31,2017 = $48,000 - Depreciation of two years         ($5,000×2)

=$48,000 - $10,000

=$38,000

Book value of truck as on 31, December 2017 is $38,000 and selling price is $43,000, so there is gain on sales which is computed as shown below:

Gain on sale = Selling price - book value

                     = 43,000 - 38,000

                     = $5,000

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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