Question

In the recent years, PT Angus has purchased three delivery trucks Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method of each delivery truck, and various methods have been used. Information concerning the delivery trucks is summarized in the table below Delivery AcquiredCost Salvage Useful Life Depreciation Method Truck Value (in years) A July 1, 2012 $125,000S 10,000 B January 1, 2013 S 95,000S 7,500 10 Straight-line Double declining balance C January 1, 2013 S 96,000 S 6,000 Units -of-activity For the delivery truck number C, the truck is expected to be driven 150,000 miles. Actual miles of use in the first 3 years were: 2013: 2,800, 2014: 3,200; 2015: 3,300 Required: 1. Prepare journal entries for purchasing those delivery trucks in cash 2. Compute the amount of depreciation expense of each delivery truck per December 31, 2013. 3. Prepare journal entries for (2) 4. Prepare the depreciation table for delivery truck B Year Book Value Depreciation Annual Accumulated Book Value Beginning Rate Depreciation Depreciation Ending Expense

Answer 1

Req 1.
Journal entries for Purchase of Delivery Trucks:
Date	Accounts title and explanations				Debit $	Credit $
01.07.12	Delivery Vehicle equipment (A)Dr.				125000
	Cash account					125000
01.01.13	Delivery Vehicle equipment (B)Dr.				95000
	Cash account					95000
01.01.13	Delivery Vehicle equipment (C)Dr.				96000
	Cash account					96000
Req 2.
Depreciation expenses for The year-2013:
On Truck-A (SLM basis)
Cost of vehicle		125000
Less: Salvage		10000
Depreciable cost		115000
Divide: Life:		10
Annual depreciation		11500
On Truck-B (DDB basis)
Rate of SLM (100/5): 20%
Rate of Dep as per DDB (20*2): 40%
Therefore,
Depreciation expense for 2013: 95000*40% = 38000
On Truck-C (Units of Activity)
Cost of vehicle		96000
Less: Salvage		6000
Depreciable cost		90000
Divide: Life:		150000	Miles
Depreciation per Mile		0.6	per mile
Miles runs in 2013		2800
Depreciation expense for 2013 (2800 miles @ 0.60) = 1680
Req 3.
Journal entries for Depreciation expense of 2013:
Date	Accounts title and explanations				Debit $	Credit $
31.12.13	Depreciation expenses Dr.				11500
	Accumulated Depreciation-Delivery Equipment-A					11500
31.12.13	Depreciation expenses Dr.				38000
	Accumulated Depreciation-Delivery Equipment-B					38000
31.12.13	Depreciation expenses Dr.				1680
	Accumulated Depreciation-Delivery Equipment-C					1680
Req 4.
Depreciation Table for Truck-B
Year	BV Beg.	Dep rate	Annual Dep	Accumulated	BV end
			Expenses	Depreciation
2013	95000	40%	38000	38000	57000
2014	57000	40%	22800	60800	34200
2015	34200	40%	13680	74480	20520
2016	20520	40%	8208	82688	12312
2017	12312	40%	4812	87500	7500
Note: Dep for 2017 as per DDB = 12312*40% = 4925
But it will make the Book value at the end below $ 7500 (which is salvage value of Truck-B)
Therefore, Dep for 2017 is restricted to $ 4812 (i.e. 12312-7500) to left with salvage value at the end of life of truck.