Question

48 Saved Help Save & Exit Subm Check my work Problem 8-5A Computing and revising depreciation; selling plant assets LO C2, P1, P2 Yoshi Company completed the following transactions and events involving its delivery trucks. 2016 Jan. 1 Paid $20,515 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,450 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. 2017 Dec. 31 Due to new information obtained earlier in the year, 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. 2018 Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for $5,400 cash. Required: 1-a. Calculate depreciation for year 2017 1-b. Calculate book value and gain (loss) for sale of Truck on December, 2018 1-c. Prepare journal entries to record these transactions and events.

Answer 1

1)

Total cost [20515+1935]	22450
Less:Accumulated depreciation from 2016	4000
Book value	18450
less:revised salvage value	2700
Remaining cost to be depreciated	15750
Years of life remaining [5-1expired ]	3
Total depreciation for 2017	15750/3=5250

**Depreciation expense =[cost - salvage value ]/useful life

2016 :[22450 -2450]/5

          = 20000/5

          = 4000

1B)

Total cost [A]	22450
Depreciation expense (for 2016)	4000
Depreciation expense (for 2017)	5250
Depreciation expense (for 2018)	5250
Total accumulated depreciation 12/31/2018 [B]	14500
Book value 12/31/2018 [A-B]	7950
Sale value	5400
Book value 12/31/2018	7950
Gain/(loss)	-2550

1C)

Date	Account title	Debit	credit
1Jan 2016	Delivery truck	22450
	cash		22450
31Dec 2016	Depreciation expense	4000
	Accumulated depreciation-Delivery truck		4000
31Dec 2017	Depreciation expense	5250
	Accumulated depreciation-Delivery truck		5250
31Dec 2018	Depreciation expense	5250
	Accumulated depreciation-Delivery truck		5250
31Dec 2018	cash	5400
	Accumulated depreciation-Delivery truck	14500
	Loss on sale of truck	2550
	Delivery truck		22450