Four years ago, on january 1, california creamery bought a new delivery truck for $30,000. the company planned to use the truck for 7 years, and then sell it for $2,000. the company used the truck for 4 years and properly recorded straight-line depreciation each year. at the beginning of the 5th year, a change in emissions standards made the truck illegal in california. the company expects to sell the truck outside of california later this year for $6.000. the company should record a journal entry that includes a(n) (check all that apply) $8,000 debit to depreciation expense scetu 0 ipd $8,000 debit to impairment loss $22,000 debit to impairment loss $8.000 credit to truck $22.000 credit to truck

The company should record a journal entry that includes: Debit to Impairment Loss $8,000

Explanation:

The company uses straight-line depreciation, Depreciation Expense each year is calculated by following formula:  

Depreciation Expense = (Cost of delivery truck − Residual Value )/Useful Life  = ($30,000 - $2,000)/7 = $4,000

At the end of year 4, Accumulated depreciation = $4,000 x 4 = $16,000

At the end of year 4, Book value of the truck = $30,000 - $16,000 = $14,000

The company expects to sell the truck for $6,000 < Book value of the truck

California Creamery should record Impairment Loss for $14,000-$6,000=$8,000

The journal entry includes:

Debit to Impairment Loss $8,000

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