Loss on Vehicle Disposal Steps:

• Calculate annual depreciation: 10% straight-line on cost (assume $5,000 cost, so$500/year).
• Determine accumulated depreciation: full year in purchase year, none in disposal; assume 4 years owned, total depreciation $2,000.
• Compute book value at disposal: cost $5,000 minus$2,000 = $3,000.
• Find loss: assume sale proceeds $2,500; loss =$3,000 - $2,500 =$500 (debited to disposal account).

Why B is correct:

• Per accounting rules, loss on disposal (sale price < book value) is debited in the disposal account as an expense.

Why the others are wrong:

• A: Credit side implies profit, but scenario shows loss.
• C: $2,500 is sale proceeds (credit), not profit/loss.
• D: Debit side but wrong amount; $2,500 is not the loss figure.

Final answer: B