Question

Depreciate the truck using the units of activity method The truck is expected to travel 100,000 miles during its 6 year useful life with a salvage value of $3,300. The mileage breakdown is as follows: Year 1 - 30,000 miles; Year 2 - 25,000 miles, Year 3 - 15,000 miles, Year 4 - 10,000 miles, Year 5 - 12,000 miles, Year 6 - 8,000

Prepare the partial balance sheet at the end of year 4.

The truck was disposed of on Sept. 30 Year 5 for $19,500. Prepare the journal entry to record the disposal of the truck

Truck/Vehicle

Purchase Price $40,000

Sales Taxes 3,600

Painting and Lettering 5,000

Installation of Additional seating 2,700

Freight Insurance 500

Shipping costs 1,500

Total Acquisition cost $53,300

Answer 1

Ans: Depreciation (Acquisition Cost - Salvage value) x Estimated activity Total activity, Depreciation (Year 1) = (53,300 – 3300)x 30000 100,000 $15000 Depreciation (Year 2) = (53,300-3300) X 35000 100,000 $12.500 . Depreciatien (year 3) = (53,300- 3300)x 15000 100,000 $7500 Deprecation Year 4) = (53,300 - 3300) x 10,000 100,000 $5000 100,000 Depreciation (year 5) = 153,300-3200) 12000 I for a menths) czepto 30 sept) $ 4500

Balance sheet at the End of year 4 holstity $ Asset 53,300 Accumulated Depreciation 40,000 Truck (15000 +12500 + 7500 +5000). If Asset is sold on 30th sept year s Book value Original cost @ Acumulated Dep = 53,300 ☺ 44500 (40,000+ 4500) = $8800 Profit - sale value o Book value $19.500 Ⓡ$ 8800 = $10700 Journal Entry Alc By 19,500 Cash 8800 * To Truck Alc To Profit on sole Alc 10700

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