Question

Please explain the calculations as I am very confused with how to solve this question.
Yoshi Company completed the following transactions and events involving its delivery trucks. 2017 Jan. 1 Paid $20,515 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. 2018 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 $2,400. Recorded annual straight-line depreciation on the truck. 2019 Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for $5,300 cash. Required: 1-a. Calculate depreciation for year 2018. 1-b. Calculate book value and gain (loss) for sale of Truck on December, 2019. 1-c. Prepare journal entries to record these transactions and events.

Answer 1

1 Cost of the asset = $20,515 +$1,485 = $22,000 2 Depreciation for 2016 = ($22,000-2,000)/5 = $4,000 3 1-a) 4 Total cost 5 Less accumulated depreciation (from 2017) 6 Book value 7 Less revised salvage value 8 Remaining cost to be depreciated 9 Years of life remaining 10 Total depreciation for 2018 $ 22,000 $ 4,000 $ 18,000 $ 2,400 $ 15,600 $ 5,200 11 $ 4,000 $ 5,200 $ 5,200 $ 14,400 12 1-b) 13 Depreciation expense (for 2017) 14 Depreciation expense (for 2018) 15 Depreciation expense (for 2019) 16 Accumulated depreciation 12/31/2019 17 Book value of truck at 12/31/2019 18 Total cost 19 Accumulated depreciation 20 Book value 12/31/2019 21 Loss on sale of truck $ 22,000 $ 14,400 $ 7,600 $ -2,300

1 Cost of the asset = $20,515 +$1,485 = $22,000 2 Depreciation for 2016 = ($22,000-2,000)/5 = $4,000 3 1-a) 4 Total cost 5 Less accumulated depreciation (from 2017) 6 Book value 7 Less revised salvage value 8 Remaining cost to be depreciated 9 Years of life remaining 10 Total depreciation for 2018 22000 4000 =+B4-B5 2400 =+B6-B7 -4-1 =+B8/B9 4000 5200 5200 =+B13+B14+B15 12 1-b) 13 Depreciation expense (for 2017) 14 Depreciation expense (for 2018) 15 Depreciation expense (for 2019) 16 Accumulated depreciation 12/31/2019 17 Book value of truck at 12/31/2019 18 Total cost 19 Accumulated depreciation 20 Book value 12/31/2019 21 Loss on sale of truck 22000 =+B16 =+B18-B19 =5300-B20

Credit Debit $ 22,000 Date Account Titles and Explanation 01-01-2017 Delivery Truck Cash (To record the total cost of truck) $ 22,000 31-12-2017 Depreciation expense $ 4,000 Accumulated Depreciation $ 4,000 (To record the year end adjusting entry for depreciation) 31-12-2018 Depreciation expense $ 5,200 Accumulated Depreciation $ 5,200 (To record the year end adjusting entry for depreciation) 31-12-2019 Depreciation expense $ 5,200 Accumulated Depreciation $ 5,200 (To record the year end adjusting entry for depreciation) 31-12-2019 Cash Accumulated depreciation Loss on disposal Delivery Truck (To record the sale of truck) $ 5,300 $ 14,400 $ 2,300 $ 22,000