Question

Yoshi Company completed the following transactions and events involving its delivery trucks Year 1 Jan. 1 Poid $22,015 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. Year 2 Dec. 31 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. Year 3 Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for 55,400 cash. Required: 1-a. Calculate depreciation for Year 2 1-5. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3 1-c. Prepare Journal entries to record these transactions and events.

Answer 1

B $ 23,800 $ 4,360 $ 19,440 $ 2,700 $ 16,740 3 $ 5,580 A 1 Cost of the asset = $22,015 + $1,785 = $23,800 2 Depreciation for Year 1 = ($23,800 - $2,000)/5 = $4,360 3 1-a) 4 Total cost 5 Less accumulated depreciation (from Year 1) 6 Book value 7 Less revised salvage value 8 Remaining cost to be depreciated 9 Years of life remaining 10 Total depreciation for Year 2 11 12 1-b) 13 Depreciation expense (Year 1) 14 Depreciation expense (Year 2) 15 Depreciation expense (Year 3) 16 Accumulated depreciation 12/31/Year3 17 Book value of truck at 12/31/Year3 18 Total cost 19 Accumulated depreciation 20 Book value 12/31/Year 3 21 Loss on sale of truck $ 4,360 $ 5,580 $ 5,580 $ 15,520 $ 23,800 $ 15,520 $ 8,280 $ -2,880

B 23800 4360 =+B4-B5 2700 =+B6-B7 =4-1 =+B8/B9 A 1 Cost of the asset = $22,015 + $1,785 = $23,800 2 Depreciation for Year 1 = ($23,800 - $2,000)/5 = $4,360 3 1-a) 4 Total cost 5 Less accumulated depreciation (from Year 1) 6 Book value 7 Less revised salvage value 8 Remaining cost to be depreciated 9 Years of life remaining 10 Total depreciation for Year 2 11 12 1-b) 13 Depreciation expense (Year 1) 14 Depreciation expense (Year 2) 15 Depreciation expense (Year 3) 16 Accumulated depreciation 12/31/Year3 17 Book value of truck at 12/31/Year3 18 Total cost 19 Accumulated depreciation 20 Book value 12/31/Year 3 21 Loss on sale of truck 4360 5580 5580 =+B13+B14+B15 23800 =+B16 =+B18-B19 =5400-B20

Credit 1-c) Date Account Titles and Explanation Jan 01, Year 1 Delivery Truck Cash (To record the total cost of truck) Debit $ 23,800 $ 23,800 $ 4,360 Dec. 31, Year 1 Depreciation expense Accumulated Depreciation (To record the year end adjusting entry for depreciation) $ 4,360 $ 5,580 Dec. 31, Year 2 Depreciation expense Accumulated Depreciation (To record the year end adjusting entry for depreciation) $ 5,580 $ 5,580 Dec. 31, Year 3 Depreciation expense Accumulated Depreciation (To record the year end adjusting entry for depreciation) $ 5,580 Dec. 31, Year 3 Cash Accumulated depreciation Loss on disposal Delivery Truck (To record the sale of truck) $ 5,400 $ 15,520 $ 2,880 $ 23,800