Question

Yoshi Company completed the following transactions and events involving its delivery trucks. Year 1 Jan. 1 Paid $25,015 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 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 $2,550. 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 $5,500 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.

Answer 1

1 a) Depreciation for the year 2 Total Cost Less : Accumulated Depreciation for the year 1 Book value Less : Revised salvage value Remaining cost to be depreciated Years of life remaining Total depreciation for the year 2 $ $ $ $ $ 26,950 (4,960) 21,990 (2,550) 19,440 $ 6,480 Working Notes: 26,950 Total Cost of Truck = $25015 + $ 1935 = $ Depreciation for the year 1 = ((25015 + 1935 - 2150 )/5 = $ 4,960

1b) Book Value and Gain (loss) for sale of Truck on December 31, year 3 Depreciation expense for the year 1 Depreciation expense for the year 2 Depreciation expense for the year 3 Accumulated Depreciation 12/31/Year 3 $ $ $ $ 4,960 6,480 6,480 17,920 Book value of the truck at 12/31/Year 3 Total Cost Less : Accumulated Depreciation Book value 12/31/ Year 3 Less: Sale value of the truck Loss on sale of truck $ $ $ $ $ 26,950 (17,920) 9,030 (5,500) 3,530 Note : depreciation for the year 2 and year 3 will be same.

10) Date General Journal Debit Credit Jan 1 / Year 1 $ 26,950 Truck Cash (Purchase of truck recorded) $ 26,950 Dec 31 / Year 1 $ 4,960 $ 4,960 Depreciation expense Accumulated depreciation - Truck (Depreciation expense for the year 1 recorded) Dec 31 / Year 2 I $ 6,480 $ 6,480 Depreciation expense Accumulated depreciation - Truck (Depreciation expense for the year 2 recorded) Dec 31 / Year 3 $ 6,480 $ 6,480 Depreciation expense Accumulated depreciation - Truck (Depreciation expense for the year 3 recorded) Dec 31 / Year 3 $ $ $ 5,500 17,920 3,530 Cash Accumulated Depreciation - Truck Loss on sale of Truck Truck ( Sale of truck and loss on sale of truck recorded) $ 26,950