Question

5) 2016

Jan.		1		Paid $23,515 cash plus $1,485 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.

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 $5,500 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.

a) Record the total cost of the new delivery truck

b) Record the year-end adjusting entry for the depreciation expense of the delivery truck.

c) Record the year-end adjusting entry for the depreciation expense of the delivery truck.

d) Record the year-end adjusting entry for the depreciation expense of the delivery truck.

e) Record the sale of the delivery truck for $5,500 cash.

Answer 1

total cost					25000
less Accumulated depreciation (2015)					4600
book value					20400
less revised salvage value					2,700
remaining cost to be depreciated					17,700
years of life remaining					3
total depreciation for 2016					5900
Depreciation expense (for 2015)					4600
Depreciation expense (for 2016)					5900
Depreciation expense (for 2017)					5900
Accumulated depreciation 12/31/2017					16400
book value of truck at 12/31/2017					8600
total cost					25000
Accumulated deprecciation					16,400
book value 12/31/2017					8600
loss on sale of truck (8730-5500)					3100
no	Date	General Journal				Debit	Credit
1	1/1/2015	Trucks				25,000
		cash					25,000
2	12/31/2015	Depreciation expense				4,600
		Accumulated depreciation					4600
3	12/31/2016	Depreciation expense				5,900
		Accumulated depreciation					5,900
4	12/31/2017	Depreciation expense				5,900
		Accumulated depreciation					5,900
5	12/31/2017	Cash				5,500
		Accumulated depreciation				16,400
		loss on sale of truck				3,100
		Truck					25,000