Canyon Truck Company is a large trucking company. The company uses the units-of-production (UOP) method to depreciate its trucks.
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To follow are facts about one Mack truck in the company’s fleet. When this truck was acquired in 2018, the tractor-trailer had cost $450,000 and was expected to remain in service for 10 years or 1,000,000 miles. Its estimated residual value was $20,000. During 2018, the truck was driven 80,000 miles; during 2019, 175,000 miles; and during 2020, 185,000 miles. After the truck was driven 40,000 miles in 2021, the company traded in the Mack truck for a Freightliner truck with a fair market value of $250,000. In addition to the trade-in of the Mack truck, Canyon paid cash of $30,000 for the Freightliner truck. Determine Canyon’s gain or loss on the transaction. Prepare the journal entry to record the trade-in of the old truck for the new one. Use two decimal places for depreciation cost per mile.