Question

Yoshi Company completed the following transactions and events involving its delivery trucks.

2016

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 $2,000 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec.		31		Recorded annual straight-line depreciation on the truck.

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.

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.

Total cost Less accumulated depreciation (from 2016) Book value Less revised salvage value Remaining cost to be depreciated Years of life remaining Total depreciation for 2017

1-c. Prepare journal entries to record these transactions and events.

Answer 1

1a)

Total cost	$   25,300.00
Less accumulated depreciation (from 2016)	$   (4,660.00)
Book value	$   20,640.00
Less revised salvage value	$   (2,700.00)
Remaining cost to be depreciated	$   17,940.00
Years of life remaining	3 Years
Total depreciation for 2017	$      5,980.00

1b)

Depreciation expense (for 2016)	$      5,060.00
Depreciation expense (for 2017)	$      5,980.00
Depreciation expense (for 2018)	$      5,980.00
Accumulated depreciation 12/31/2018	$   17,020.00
Book value of truck at 12/31/2018
Total cost	$   25,300.00
Accumulated depreciation	$ (17,020.00)
Book value 12/31/2018	$      8,280.00
Loss on sale of truck	$      2,780.00

1c)

Date	General Journal	Debit	Credit
Jan 01, 2016	Trucks	$25,300.00
	Cash		$25,300.00
Dec 31, 2016	Depreciation expense—Trucks	$ 4,660.00
	Accumulated depreciation—Trucks		$ 4,660.00
Dec 31, 2017	Depreciation expense—Trucks	$ 5,980.00
	Accumulated depreciation—Trucks		$ 5,980.00
Dec 31, 2018	Depreciation expense—Trucks	$ 5,980.00
	Accumulated depreciation—Trucks		$ 5,980.00
Dec 31, 2018	Cash	$ 5,500.00
	Accumulated depreciation—Trucks	$17,020.00
	Loss on disposal of trucks	$ 2,780.00
	Trucks		$25,300.00