Question

The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.

Year 1
Jan. 4.	Purchased a used delivery truck for $27,200, paying cash.
Nov. 2.	Paid garage $630 for miscellaneous repairs to the truck.
Dec. 31.	Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,005 for the truck.
Year 2
Jan. 6.	Purchased a new truck for $49,250, paying cash.
Apr. 1.	Sold the used truck for $14,670. (Record depreciation to date in Year 2 for the truck.)
June 11.	Paid garage $450 for miscellaneous repairs to the truck.
Dec. 31.	Record depreciation for the new truck. It has an estimated residual value of $8,950 and an estimated life of five years.
Year 3
July 1.	Purchased a new truck for $53,920, paying cash.
Oct. 2.	Sold the truck purchased January 6, Year 2, for $17,125. (Record depreciation to date for Year 3 for the truck.)
Dec. 31.	Recorded depreciation on the remaining truck. It has an estimated residual value of $12,945 and an estimated useful life of eight years.

Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

solution

DATE	JOURNAL ENTRY AND EXPLANATION	DEBIT($)	CREDIT($)
YEAR1
JAN 1	Delivery Truck	27,200
	cash		27,200
	[To Record Purchase of Truck]
nov 4	Repair expenses	630
	Cash		630
	[To Record Repair Expense]
Dec31	Depreciation Expense—Delivery Truck	13,600
	Accumulated Depreciation - Delivery Truck		13,600
	[27,200 x(1/4 x2)]
	To Record Depreciation Expense
Year 2
Jan 6	Delivery Truck	49,250
	cash		49,250
	[To Record Purchase of Truck]
April 1	Depreciation Expense—Delivery Truck	1700
	Accumulated Depreciation - Delivery Truck		1,700
	[(27,200 -13,600) x (1/4 x2) x3/12]
	To Record Depreciation Expense
	Accumulated Depreciation - Delivery Truck	15,300
	Cash	14,670
	Delivery Truck		27,200
	Gain on Sale of Delivery Truck		2,770
	[To Record sales of truck]
June 11	Repair expenses	450
	Cash		450
	[To Record Repair Expense]
Dec31	Depreciation Expense—Delivery Truck	19,700
	Accumulated Depreciation - Delivery Truck		19,700
	[49,250 x(1/5x 2)]
	[To Record Depreciation Expense]
Year3
Jul1	Delivery Truck	53,920
	cash		53,920
	[To Record Purchase of Truck]
Oct2	Depreciation Expense—Delivery Truck	8,865
	Accumulated Depreciation - Delivery Truck		8,865
	[(49,250-19,700) x(1/5 x2) x9/12]
	[To Record Depreciation Expense]
	Accumulated Depreciation - Delivery Truck	28,565
	Cash	17,125
	Loss on Sale of Delivery Truck	3560
	Delivery Truck		49,250
	[To Record Sales of Truck]
Dec31	Depreciation Expense—Delivery Truck	6,740
	Accumulated Depreciation - Delivery Truck		6,740
	[53,920 x(1/8 x2) x 1/2]
	[To Record Depreciation Expense]

learning note :The double-declining-balance method depricated assest twice as fast as the traditional decling balance method.it records larger deprication expenses in earlier years and smaller in later years.as a result value of assets lose early on or which will become obsolete more quickly.

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