Thank you Len for your advice to check the loco with the 9V battery. I have checked it with the battery and it looks like the loco is fine - the lights are on and wheels slowly spinning. So, I assume that something is wrong with the speed controller. I will check it.

Update: I have checked the speed controller and found that there is a loose connection on mother DC output socket. On socket I have about 24V but when I connect the cord into this socket there is no V. I will try to find a similar socket in the store or will just weld cord directly to the speed controller board.
Thank you for your help guys!

I connected locomotive engine to the output which comes from the speed controller. I have the speed controller similar to this one:
http://estore.bachmanntrains.com/index.php?main_page=product_info&cPath=66_74&products_id=5872

This speed controller has texts around input from power supply: 1000mA, 16V AC IN
Output to accessories 16V AC
Output to truck doesn't have any texts.

Power supply label has next texts:
Model: AC1601000
Input: AC120V 60Hz 24W
Output: AC16V 1000mA 16VA

Is it DC or DCC ?  

I am not sure if I have DC or DCC. Power supply with controller has numbers 1000ma, 16V. I have disassembled the locomotive and connected wires from controller directly to engine - no effect. Engine is still not alive and loco lights are off.

I have HO scale E-Z 'CARGO KING' set with EMD GP40 Diesel locomotive. It was rare used when my children played with this set. Most of the time it sits in the box. Something happened last time when children played with the set and now locomotive does not power up. There are no lights on locomotive and no engine live. I have checked with multimeter the rails and they show Vac value. I put the locomotive only on one piece of the rail which has a power but locomotive looks powered off completely. I am not sure what wrong is. Is it power supply problem or locomotive issue? Can somebody help with the advice, please? Thanks!