Question

In: Accounting

On January 1, Delivery, Inc. purchased a truck for $67,500 with a $6,000 salvage value and...

On January 1, Delivery, Inc. purchased a truck for $67,500 with a $6,000 salvage value and a four-year life. The company used the straight-line method of depreciation. The truck was sold on December 31, Year 2 for $22,500. Which of the following is one effect of recording the truck sale in the accounting records?

Select one: A. The Truck account is reduced by $33,000.

B. The Accumulated Depreciation account is reduced by $30,750.

C. A loss of $45,000 is recognized.

D. Cash is increased by $45,000.

Solutions

Expert Solution

Answer- The following is one effect of recording the truck sale in the accounting records= The Accumulated Depreciation account is reduced by $30,750.

Explanation- Straight line Method- Annual depreciation

= Cost of asset- Salvage value of asset/No. of useful life (years)

=($67500-$6000)/4 years

=$61500/4 years

= $15375      

Depreciation expense per year = $15375.

Accumulated depreciation on December 31, Year 2 = $15375+$15375

= $30750

Book value at the end of year 2 = $67500-$30750 = $36750

Loss on sale of truck = $36750-$22500

= $14250

Journal entry for sale truck are as follows-

    

Date Accounts Titles & Explanation Debit Credit
$ $
Dec-31 Cash 22500
Year 2 Accumulated depreciation-Truck 30750
Loss on sale of truck 14250
Truck 67500
(Being entry recorded )

       


Related Solutions

Skysong, Inc. purchased a delivery truck for $32,400 on January 1, 2019. The truck has an...
Skysong, Inc. purchased a delivery truck for $32,400 on January 1, 2019. The truck has an expected salvage value of $2,400, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,700 in 2019 and 12,900 in 2020. Compute depreciation expense for 2019 and 2020 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method. (Round depreciable cost per unit to 2 decimal places, e.g. 0.50...
Straight-Line Depreciation Irons Delivery Inc. purchased a new delivery truck for $42,000 on January 1, 2019....
Straight-Line Depreciation Irons Delivery Inc. purchased a new delivery truck for $42,000 on January 1, 2019. The truck is expected to have a $2,020 residual value at the end of its 5-year useful life. Irons uses the straight-line method of depreciation. Required: Prepare the journal entry to record depreciation expense for 2019 and 2020. 2019 Dec. 31 Depreciation Expense Accumulated Depreciation (Record straight-line depreciation expense) 2020 Dec. 31 Depreciation Expense Accumulated Depreciation (Record straight-line depreciation expense)
Units-of-Production Depreciation Irons Delivery Inc. purchased a new delivery truck for $42,000 on January 1, 2019....
Units-of-Production Depreciation Irons Delivery Inc. purchased a new delivery truck for $42,000 on January 1, 2019. The truck is expected to have a $2,000 residual value at the end of its 5-year useful life. Irons uses the units-of-production method of depreciation. Irons expects the truck to run for 150,000 miles. The actual miles driven in 2019 and 2020 were 40,000 and 36,000, respectively. Required: Prepare the journal entry to record depreciation expense for 2019 and 2020. Round your answers to...
On January 1, Town Spa Pizza purchased a delivery truck for $36,000. The truck has an...
On January 1, Town Spa Pizza purchased a delivery truck for $36,000. The truck has an estimated useful life of 10 years or 140,000 miles and an estimated residual value of $8,000. Town Spa’s fiscal year is the calendar year. Calculate the amounts requested below. 1)Depreciation Expense for the year, using the production method. Assume 22,000 miles were driven this year: A) $4,400 B) $5,657 C)2,800 D)3,600 2)The total accumulated depreciation after the truck has been used for 5 years,...
Swifty Company purchased a delivery truck for $26,000 on January 1, 2020. The truck has an...
Swifty Company purchased a delivery truck for $26,000 on January 1, 2020. The truck has an expected salvage value of $1,000, and is expected to be driven 100,000 miles over its estimated useful life of 10 years. Actual miles driven were 12,800 in 2020 and 12,000 in 2021. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.) Depreciation expense $ per mile eTextbook and Media List of Accounts Compute depreciation expense for 2020...
Linton Company purchased a delivery truck for $28,000 on January 1, 2017. The truck has an...
Linton Company purchased a delivery truck for $28,000 on January 1, 2017. The truck has an expected salvage value of $2,200, and is expected to be driven 110,000 miles over its estimated useful life of 10 years. Actual miles driven were 12,300 in 2017 and 10,000 in 2018. Collapse question part (a1) Correct answer. Your answer is correct. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.52.) Depreciation expense $Entry field with correct...
linton company purchased a delivery truck for 33.000 on january 1 2017 the truck has an...
linton company purchased a delivery truck for 33.000 on january 1 2017 the truck has an expected salvage value of 1,300 and is expected to be driving 109,000 miles over its esitmated useful of life of 9 years. acutal miles driving were 15,400 for 2017 and 12,500 in 2018 what is the depreication expense for 2017 and 2018 using the stright line method , the unit of activity method and the decling balance method
Linton Company purchased a delivery truck for $29,000 on January 1, 2017. The truck has an...
Linton Company purchased a delivery truck for $29,000 on January 1, 2017. The truck has an expected salvage value of $2,100, and is expected to be driven 106,000 miles over its estimated useful life of 10 years. Actual miles driven were 15,300 in 2017 and 13,400 in 2018. Correct answer. Your answer is correct. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.52.) Depreciation expense $Entry field with correct answer .25 per mile...
ABC Delivery Company purchased a new delivery truck on January 1 with an original cost of...
ABC Delivery Company purchased a new delivery truck on January 1 with an original cost of $50,000. The company estimates it will use the truck for 5 years and drive a total of 100,000 miles. It plans to sell the truck at the end of the five years for $5,000. During the first year, the truck was driven 15,000 miles. What is the depreciation for the first year using the DoubleDeclining Balance method? $10,000 $18,000 $7,500 $20,000 $6,750 $9,000
On October 1, 2018, Joe Company purchased a truck for $24,000 with a salvage value of...
On October 1, 2018, Joe Company purchased a truck for $24,000 with a salvage value of $1,500 after its 5 years useful life. The company uses the double declining balance depreciation method. Prepare the depreciation schedule of the truck over its useful life and specify the amounts of: DDB Rate Depreciation Expense of the year 2018 Accumulated depreciation of the year 2019 Book Value at the beginning of the year 2020 Accumulated depreciation of the year 2023 Book Value at...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT