On July 1, 2016, Farm Fresh Industries purchased a specialized delivery truck for $205,800. At the...
On July 1, 2016, Farm Fresh Industries purchased a specialized
delivery truck for $205,800. At the time, Farm Fresh estimated the
truck to have a useful life of eight years and a residual value of
$33,000. On March 1, 2021, the truck was sold for $102,000. Farm
Fresh uses the straight-line depreciation method for all of its
plant and equipment. Partial-year depreciation is calculated based
on the number of months the asset is in service.
Required:
1. Prepare the journal entry to update
depreciation in 2021.
2. Prepare the journal entry to record the sale of
the truck.
3. Assuming that the truck was instead sold for
$118,000, prepare the journal entry to record the sale.
Homework Answers
Accumulated depreciation = (205800-33000/8*4.5) = 97200
Jan 1 to Feb 28 depreciation = (205800-97200-33000)/3.5*2/12 = 3600
a) Journal entry
| Date | account and explanation | Debit | Credit |
| Mar 1 | Depreciation expense | 3600 | |
| Accumulated depreciation-Delivery truck | 3600 | ||
b) Journal entry
| Date | account and explanation | Debit | Credit |
| Mar 1 | cash | 102000 | |
| Accumulated depreciation-delivery truck (97200+3600) | 100800 | ||
| Loss on sale of equipment | 3000 | ||
| Delivery truck | 205800 |
c) Journal entry
| Date | account and explanation | Debit | Credit |
| Mar 1 | cash | 118000 | |
| Accumulated depreciation-delivery truck (97200+3600) | 100800 | ||
| gain on sale of equipment | 13000 | ||
| Delivery truck | 205800 |
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