Question

1 Mar Purchased a truck for $100,000 with a 10-year useful life and a $10,000 residual value. The Certificate of Entitlement (COE) of $20,000 is required in order to drive the vehicle legally. Also paid 7% sales tax, $500 to paint the truck with the company's logo and name. All payments were in cash. The management has decided to depreciate Trucks using the units of production method. The total mileage estimated to be driven by the truck is 100,000km. For the current year, the total mileage driven by the truck was 10,000km.

May I know what are the journal entries required for these? Thank you. Been stuck forever :/

Answer 1

Answer:

Part 1)

Date XXX Account Titles and Explanation Debit($) Credit($) Truck 127,000 Truck Painting Expeneses 500 To Cash 127,500 (Being Entry for truck purchase)

Explanation:

Cost of Asset capitalised=Purchase price+Certificate of entitlement+Sales tax

=100,000+20,000+(7%*100,000)

=127,000 (cost of painting logo cannot be capitalised since it won't improve its efficiency nor it is required to the bring the asset to working condition.

Part 2)

Date XXX Account Titles and Explanation Debit($) Credit($) Depreciation Expense 11,700 TO Accumulated depreciation 11,700 (Being Depreciation for current year)

Explanation:

Depreciation expense (current year)=(Original cost-Salvage)*Miles driven/total life in miles=(127,000-10,000)*10,000/100,000=11,700

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