Question

Chech Yoshi Company completed the following transactions and events involving its delivery trucks. Year 1 Jan. 1 Paid $23,515 cash plus $1,785 in sales tax for a new delivery truck estimated to have a five-year life and a $2,300 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. Year 2 Dec. 31 The truck's estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,85e. Recorded annual straight-line depreciation on the truck. Year 3 Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for $5,600 cash. Required: 1-a. Calculate depreciation for Year 2 1-b. Calculate book value and gain loss) for sale of Truck on December 31 Year 3. 1-c. Prepare journal entries to record these transactions and events Complete this question by entering your answers in the tabs below Required 1A Required 10 Required 1C Calculate depreciation for Year 2

Answer 1

1A)

Total cost ($23515+1785)	$25300
Less: Accumulated depreciation (from Year 1)	4600
Book value	20700
Less: Revised salvage value	2850
Remaining cost to be depreciated	17850
Years of life remaining	3
Total depreciation for Year 2	$5950

Depreciation expense for Year 1= ($25300-2300)/5= $4600

1B)

Depreciation expense (for Year 1)	$4600
Depreciation expense (for Year 2)	5950
Depreciation expense (for Year 3)	5950
Accumulated depreciation 12/31/Year 3	16500
Book value of truck at 12/31/Year 3
Total cost	$25300
Accumulated depreciation	16500
Book value 12/31/Year 3	8800
Gain (loss) on sale of truck	$(3200)

Loss on sale of truck= Book value of the truck on 12/31/Year 3-Sales price

= $8800-5600= $3200

1C)

Date	Account titles and explanation	Debit	Credit
Jan 1, Year 1	Trucks (23515+1785)	$25300
	Cash		$25300
	(To record truck purchased)
Dec 31, Year 1	Depreciation expense	$4600
	Accumulated depreciation- Trucks		$4600
	(To record depreciation expense)
Dec 31, Year 2	Depreciation expense	$5950
	Accumulated depreciation- Trucks		$5950
	(To record depreciation expense)
Dec 31, Year 3	Depreciation expense	$5950
	Accumulated depreciation- Trucks		$5950
	(To record depreciation expense)
Dec 31, Year 3	Cash	$5600
	Accumulated depreciation	$16500
	Loss on sale of truck	$3200
	Trucks		$25300
	(To record truck sold)