Question

20 On January 2, 2015, a company purchased a delivery truck (Truck 1) for $45,000 cash. The truck had an estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line method of depreciation has been used. Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1, 2019, under each of the following assumptions. Show your work. 45our 42our (57164) 1. Record depreciation expense on Truck 1 for 2019. 28, sur 2. The truck and $45,000 cash were exchanged for a new delivery truck (Truck 2) that had a cash price of $60,000 3. The truck and $40,000 cash were exchanged for a new delivery truck (Truck 2) that had a cash price of $60,000. 4. The truck was totally destroyed in a fire and the insurance company settled the claim for $22,000 cash. (Record gain or loss to Gain/Loss from Fire Damage account.) 42 LIO Debit Credit Date TSEP Account Depree Accuma Dept I 28500 Date Account Debit Credit Date Account Debit Credit Date Account Debit Credit

Answer 1

Date	General Journal	Debit	Credit
Sep-01	Depreciation expense ($45,000-$3,000)/7*9/12)	$     4,500
	Accumulated depreciation - Truck		$     4,500
Sep-01	Truck (New)	$   60,000
	Accumulated depreciation - Truck (($45,000-3,000)/7*4)+$4,500)	$   28,500
	Loss on exchange of assets	$     1,500
	Truck (Old)		$   45,000
	Cash		$   45,000
Sep-01	Truck (New)	$   60,000
	Accumulated depreciation - Truck (($45,000-3,000)/7*4)+$4,500)	$   28,500
	Truck (Old)		$   45,000
	Cash		$   40,000
	Gain on exchange of assets		$     3,500
Sep-01	Cash/Insurance claim receivable	$   22,000
	Accumulated depreciation - Truck (($45,000-3,000)/7*4)+$4,500)	$   28,500
	Truck		$   45,000
	Gain from fire damage		$     5,500

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