Question

Instructions Chart of Accounts ! Journal Instructions The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. 2014 Jan. 4. Nov. 2. Dec. 31. Purchased a used delivery truck for $28,000, paying cash. Paid garage $675 for miscellaneous repairs to the truck. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. 2015 Jan. 6. Apr. 1. June 11. Dec. 31. Purchased a new truck for $48,000, paying cash. Sold the used truck for $15,000. (Record depreciation to date in 2015 for the truck.) Paid garage $450 for miscellaneous repairs to the truck. Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. 2016 July 1. Oct. 2. Purchased a new truck for $54,000, paying cash. Sold the truck purchased January 6, 2015, for $16,750. (Record depreciation to date for 2016 for the truck.) Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years. Dec. 31. Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles. Be sure to include the YEAR in the date for the FIRST transaction on each page. Check My Work < Previous

Answer 1

	Date	General journal					Debit	Credit
	2014
	Jan 4.	Delivery truck					28000
		Cash						28000
		(Purchased delivery truck)
	Nov 2.	Truck repair expense					675
		Cash						675
		(Repairs paid)
	Dec 31.	Depreciation expense-Delivery truck				(Note:1)	14000
		Accumulated depreciation-Delivery truck						14000
		(Depreciation recorded)
	2015
	Jan 6.	Delivery truck					48000
		Cash						48000
		(Purchased delivery truck)
	Apr 1.	Depreciation expense-Delivery truck				(Note:2)	1750
		Accumulated depreciation-Delivery truck						1750
		(Depreciation recorded for 3 months)
	Apr 1.	Cash					15000
		Accumulated depreciation-Delivery truck				(14000+1750)	15750
		Delivery truck						28000
		Gain on sale of delivery truck						2750
		(Truck sold)
	June 11.	Truck repair expense					450
		Cash						450
		(Repairs paid)
	Dec 31.	Depreciation expense-Delivery truck				(Note:3)	19200
		Accumulated depreciation-Delivery truck						19200
		(Depreciation recorded)
	2016
	July 1.	Delivery truck					54000
		Cash						54000
		(Purchased delivery truck)
	Oct 2.	Depreciation expense-Delivery truck				(Note:4)	2880
		Accumulated depreciation-Delivery truck						2880
		(Depreciation recorded for 9 months)
		Cash					16750
		Accumulated depreciation-Delivery truck				(19200+2880)	22080
		Loss on sale of delivery truck					9170
		Delivery truck						48000
		(Truck sold)
	Dec 31.	Depreciation expense-Delivery truck				(Note:5)	3375
		Accumulated depreciation-Delivery truck						3375
		(Depreciation recorded)
	Note:1
	Depreciation rate under double declining balance method=2*(1/Useful life)*100=2*(1/4)*100=2*0.25*100=0.50*100=50%
	Depreciation expense=28000*50%=$ 14000
	Note:2
	Depreciation expense=Book value*Depreciation rate*3/12=(28000-14000)*50%*3/12=14000*50%*3/12=7000*3/12=$ 1750
	Note:3
	Depreciation rate under double declining balance method=2*(1/Useful life)*100=2*(1/5)*100=2*0.20*100=0.40*100=40%
	Depreciation expense=48000*40%=$ 19200
	Note:4
	Depreciation expense from Jan 1 to Oct 2=Book value*Depreciation rate*9/12=(48000-19200)*40%*9/12=28800*40%*3/12=11520*3/12=$ 2880
	Note:5
	Depreciation rate under double declining balance method=2*(1/Useful life)*100=2*(1/8)*100=2*0.125*100=0.25*100=25%
	Truck purchased on July 1.Hence compute depreciation from July 1 to Dec 31 (For 6 months)
	Depreciation expense=54000*25%*3/12=$ 3375