Question

Jessica Grewal decided to open a food truck business, the Samosa Shack. She encountered the following transactions in managing her equipment over the first 2 years of her business. April 1, 2015 Purchased food truck for $60,000 and paid $6,000 to have a commercial oven installed. Other costs that she incurred are $6.000 for insurance on the truck for the first vear, and $3,000 to have the truck painted with her Samosa Shack logo. Jessica estimates that the truck would last 5 years and have a $12,000 residual value. The oven is also expected to last 5 years and have a $900 residual value. The oven broke down and cost $3,000 to repair. October 1, 2015 December 31, 2015 Recorded the adjusting entry for depreciation and insurance April 1, 2016 Replaced all of the tires with all-season tires for $3,000 and paid another year of insurance for $6,000. Recorded the adjusting entry for depreciation, and insurance. December 31, 2016 March 31, 2017 Jessica was exhausted from the food truck business, and decided to go back to school and sell the food truck to her friend Mark. He paid her $27,000 for the truck and oven, which included $1,200 for the oven component. Note: The company calculates depreciation using the straight-line method to the nearest month. Required: Record all the entries for the 2 years that Jessica owned the truck, including the disposal of the truck and oven. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 3 4 5 6 7 8 ..... 12 > Record to purchase of food truck, oven and insurance. Note: Enter debits before credits. General Journal Debit Credit Date April 01, 2015 Record entry Clear entry View general journal

Answer 1

Answer -

1.

Date	General Journal	Debit	Credit
April 01, 2015	Food truck	$63000
	Oven	$6000
	Prepaid insurance	$6000
	Cash		$75000

Calculation:

Food truck = $60000 + $3000 = $63000

2.

Date	General Journal	Debit	Credit
Oct. 01, 2015	Repairs expense	$3000
	Cash		$3000

3.

Date	General Journal	Debit	Credit
Dec. 31, 2015	Insurance expense	$4500
	Prepaid insurance		$4500

Calculation:

Prepaid insurance = $6000 * (9/12 months) = $4500

4.

Date	General Journal	Debit	Credit
Dec. 31, 2015	Depreciation expense-Truck	$7650
	Accumulated depreciation-Truck		$7650

Calculation:

Depreciation expense = (Cost of assets - Residual value) / Useful life

Depreciation expense = ($63000 - $12000) / 5 years

Depreciation expense = $10200 (Annual)

For 9 months = $10200 * (9/12 months) = $7650

5.

Date	General Journal	Debit	Credit
Dec. 31, 2015	Depreciation expense-Oven	$765
	Accumulated depreciation-Oven		$765

Calculation:

Depreciation expense = (Cost of assets - Residual value) / Useful life

Depreciation expense = ($6000 - $900) / 5 years

Depreciation expense = $1020 (Annual)

For 9 months = $1020 * (9/12 months) = $765

6.

Date	General Journal	Debit	Credit
April. 01, 2016	Prepaid insurance	$6000
	Repairs expense	$3000
	Cash		$9000

7.

Date	General Journal	Debit	Credit
Dec. 31, 2016	Insurance expense	$6000
	Prepaid insurance		$6000

8.

Date	General Journal	Debit	Credit
Dec. 31, 2016	Depreciation expense-Truck	$10200
	Accumulated depreciation-Truck		$10200

Calculation:

Depreciation expense = (Cost of assets - Residual value) / Useful life

Depreciation expense = ($63000 - $12000) / 5 years

Depreciation expense = $10200

9.

Date	General Journal	Debit	Credit
Dec. 31, 2016	Depreciation expense-Oven	$1020
	Accumulated depreciation-Oven		$1020

Calculation:

Depreciation expense = (Cost of assets - Residual value) / Useful life

Depreciation expense = ($6000 - $900) / 5 years

Depreciation expense = $1020

10.

Date	General Journal	Debit	Credit
March. 31, 2017	Depreciation expense-Truck	$2550
	Accumulated depreciation-Truck		$2550

Calculation:

Depreciation expense = (Cost of assets - Residual value) / Useful life

Depreciation expense = ($63000 - $12000) / 5 years

Depreciation expense = $10200 (Annual)

For 3 months = $10200 * (3/12 months) = $2550

11.

Date	General Journal	Debit	Credit
March. 31, 2017	Depreciation expense-Oven	$255
	Accumulated depreciation-Oven		$255

Calculation:

Depreciation expense = (Cost of assets - Residual value) / Useful life

Depreciation expense = ($6000 - $900) / 5 years

Depreciation expense = $1020 (Annual)

For 3 months = $1020 * (3/12 months) = $255

12.

Date	General Journal	Debit	Credit
March. 31, 2017	Cash	$27000
	Loss on disposal	$19560
	Accumulated depreciation-Truck	$20400
	Accumulated depreciation-Oven	$2040
	Food truck		$63000
	Oven		$6000

Calculation:

Accumulated depreciation-Truck (For 2 years) = Annual depreciation * 2 years

= $10200 * 2 years

= $20400

Accumulated depreciation-Oven (For 2 years) = Annual depreciation * 2 years

= $1020 * 2 years

= $2040

Loss on disposal = [Food truck + Oven] - [Cash + Accumulated depreciation-Truck + Accumulated depreciation-Oven]

= [$63000 + $6000] - [$27000 + $20400 + $2040]

= $19560