Question

Accounting for Plant Assets

Stellar Delivery Service had the following transactions related to its delivery truck:

Year 1
Mar. 1	Purchased for $81,250 cash a new delivery truck with an estimated useful life of five years and a $17,125 salvage value.
Mar. 2	Paid $1,500 for painting the company name and logo on the truck.
Dec. 31	Recorded depreciation on the truck for the year.

Year 2
July 1	Installed air conditioning in the truck at a cost of$4,520 cash. Although the truck's estimated useful life was unaffected, its estimated salvage value was increased by $1,000.
Sept 7	Paid $450 for truck tune-up and safety inspection.
Dec. 31	Recorded depreciation on the truck for the year.

Year 3
Sept 3	Installed a set of front and rear bumper guards at a cost of $145 cash.
Dec. 31	Recorded depreciation on the truck for the year.

Year 4
Dec. 31	Recorded depreciation on the truck for the year.

Stellar's depreciation policies include (1) using straight-line depreciation, (2) recording depreciation to the nearest whole month, and (3) expensing all truck expenditures of $150 or less.

Required

Prepare journal entries to record these transactions and adjustments.

Round answers to the nearest whole number, when appropriate.

General Journal
Date	Description	Debit	Credit
YEAR 1
Mar. 5	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record purchase of truck.
Mar. 2	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record cost of logo
Dec. 31	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record depreciation expense.

General Journal
Date	Description	Debit	Credit
YEAR 2
Jul. 1	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record cost of air-conditioning.
Sep. 7	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record tune-up and safety inspection cost.
Dec. 31	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record depreciation expense.

General Journal
Date	Description	Debit	Credit
YEAR 3
Sep. 3	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record installation of bumper guards.
Dec. 31	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record depreciation expense.

General Journal
Date	Description	Debit	Credit
YEAR 4
Dec. 31	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record depreciation expense.

Answer 1

In the books of Stellar Delivery Service :

Date	General Journal	Debit	Credit
		$	$
Year 1
Mar 1	Delivery Truck	81,250
	Cash		81,250
	To record purchase of truck
Mar 2	Delivery Truck	1,500
	Cash		1,500
	To record cost of logo
Dec 31	Depreciation Expense: Delivery Truck	10,938
	Accumulated Depreciation : Delivery Truck		10,938
	To record depreciation expense
Year 2
July 1	Delivery Truck	4,520
	Cash		4,520
	To record cost of airconditioning
Sep 7	Truck Repairs and Maintenance Expense	450
	Cash		450
	To record tune-up and safety inspection cost
Dec 31	Depreciation Expense: Delivery Truck	13,605
	Accumulated Depreciation : Delivery Truck		13,605
	To record depreciation expense
Year 3
Sep 3	Truck Repairs and Maintenance Expense	145
	Cash		145
	To record installation of bumper guards
Dec 31	Depreciation Expense: Delivery Truck	14,084
	Accumulated Depreciation : Delivery Truck		14,084
	To record depreciation expense
Year 4
Dec 31	Depreciation Expense: Delivery Truck	14,084
	Accumulated Depreciation : Delivery Truck		14,084
	To record depreciation expense

Year 1 Depreciation expense = $ ( 81,250 + 1,500 - 17,125) / 5 * 10/12 = $ 10,938

Year 2 :

Depreciation expense Jan 1 - June 30 : $ ( 81,250 + 1,500 - 17,125) / 5 * 1/2 = $ 6,563

Depreciation expense July 1 - Dec 31 : $ ( 81,250 + 1,500 + 4,520 - 10,938 - 6,563 - 18,125) / 44 * 6 = 7,042

Total depreciation expense for Year 2 = $ 6,563 + $ 7,042 = $ 13,605

Year 3 Depreciation expense : $ 7,042 x 2 = $ 14,084