Question

Yoshi Company completed the following transactions and events involving its delivery trucks.

2017

Jan.		1		Paid $20,515 cash plus $1,635 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.

2018

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.

2019

Dec.		31		Recorded annual straight-line depreciation on the truck.
Dec.		31		Sold the truck for $5,300 cash.

Required:

1-a. Calculate depreciation for year 2018.
1-b. Calculate book value and gain (loss) for sale of Truck on December, 2019.
1-c. Prepare journal entries to record these transactions and events.

Answer 1

1-a)	Depreciation for the year 2018 = (22150-2450)/5 =	3940
1-b)	WORKINGS FOR REVISING DEPRECIATION:
	Book value before revision = 22150-3940 =	18210
	Less: Revised salvage value	2700
	Amount to be depreciated in 3 years	15510
	Annual depreciation = 15510/3 =	5170
	WORKING FOR LOSS ON SALE:
	Sale value of the truck	5300
	Book value of the truck = 22150-14280=	7870
	Loss on sale	2570
2017
1-Jan	Trucks (20515+1632)	22150
	Cash		22150
31-Dec	Depreciation (22150-2450)/5	3940
	Accumulated depreciation-Trucks		3940
2018
31-Dec	Depreciation	5170
	Accumulated depreciation		5170
	WORKINGS FOR REVISING DEPRECIATION:
	Book value before revision = 22150-3940 =	18210
	Less: Revised salvage value	2700
	Amount to be depreciated in 3 years	15510
	Annual depreciation = 15510/3 =	5170
2019
31-Dec	Depreciation	5170
	Accumulated depreciation		5170
31-Dec	Cash	5300
	Accumulated depreciation	14280
	Loss on sale of truck	2570
	Trucks		22150