Question

QUIZ-CHB 0 Problem 8-5A Computing and revising depreciation; selling plant assets LO C2, P1, P2 Yoshi Company completed the following transactions and events involving its delivery trucks. 2.85 points 2016 Jan. 1 Paid $22,015 cash plus $1,485 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. ( 00:54:50 2017 Dec. 31 Due to new information obtained earlier in the year, the truck's estimated useful life was changed from five to four years. and the estimated salvage value was increased to $2,700. Recorded annual straight-line depreciation on the truck. eBook 2018 Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for $5,500 cash. Required: 1-a. Calculate depreciation for year 2017 1-b. Calculate book value and gain (loss) for sale of Truck on December, 2018 1-c. Prepare journal entries to record these transactions and events Complete this question by entering your answers in the tabs below.

Answer 1

Answer -

1A. Answer -

Total cost	$23500
Less: Accumulated depreciation (from 2016)	$4240
Book value	$19260
Less: Revised salvage value	$2700
Remaining cost to be depreciated	$16560
Years of life remaining	3
Total depreciation for 2017	$5520

Calculation:

1. Total cost = $22015 + $1485 (Sales tax) = $23500

2. Accumulated depreciation (from 2016):

Depreciation expense = [Cost of truck - Salvage value] / Estimated life

Depreciation expense = [$23500 - $2300] / 5 years

Depreciation expense or Accumulated depreciation (from 2016) = $4240

3. Book value = Total cost - Accumulated depreciation (from 2016) = $23500 - $4240 = $19260

4. Remaining cost to be depreciated = [Book value - Revised salvage value] = [$19260 - $2700] = $16560

5. Total depreciation for 2017:

Here,

The truck’s estimated useful life was changed from 5 years to 4 years. So, years of life remaining is 3 years.

Depreciation expense = Remaining cost to be depreciated / Remaining life

Depreciation expense = $16560 / 3 years

Depreciation expense = $5520

1B. Answer -

Depreciation expense (for 2016)	$4240
Depreciation expense (for 2017)	$5520
Depreciation expense (for 2018)	$5520
Accumulated depreciation 12/31/2018	$15280
Book value of truck at 12/31/2018
Total cost	$23500
Accumulated depreciation 12/31/2018	($15280)
Book value 12/31/2018	$8220
Loss on sale of truck	$2720

Calculation:

1. Depreciation expense (for 2018):

Here,

Yoshi company uses straight-line depreciation method. Under straight-line depreciation method depreciation expenses same for every years. So, depreciation expense for 2018 is same as depreciation expense for 2017.

Depreciation expense (for 2018) = $5520

2. Accumulated depreciation 12/31/2018:

= Depreciation expense (for 2016) + Depreciation expense (for 2017) + Depreciation expense (for 2018)

= $4240 + $5520 + $5520

= $15280

3. Book value 12/31/2018:

= Total cost - Accumulated depreciation 12/31/2018

= $23500 - $15280 = $8220

4. Loss on sale of truck:

= Book value 12/31/2018 - Sold truck for cash

= $8220 - $5500 = $2720

1C. Answer -

Transaction	Date	General Journal	Debit	Credit
1.	Jan. 01, 2016	Trucks	$23500
		Cash		$23500
2.	Dec. 31, 2016	Depreciation expense-Trucks	$4240
		Accumulated depreciation-Trucks		$4240
3.	Dec. 31, 2017	Depreciation expense-Trucks	$5520
		Accumulated depreciation-Trucks		$5520
4.	Dec. 31, 2018	Depreciation expense-Trucks	$5520
		Accumulated depreciation-Trucks		$5520
5.	Dec. 31, 2018	Cash	$5500
		Accumulated depreciation-Trucks	$15280
		Loss on sale of Trucks	$2720
		Trucks		$23500