In: Accounting
The Parker Piano Company purchased a Delivery Truck on January 1, 2025 for $50,000 which included all costs to get the asset ready for use. The truck has an anticipated life of 100,000 miles or 4 years. The estimated residual value at the end of the assets service life is expected to be $2,000. For assets of this type, the company utilizes the straight-line depreciation method.
Date |
Account Name |
Debit |
Credit |
Period Ended |
Depreciation Expense |
Accumulated Depreciation |
End of Period Book Value |
December 31, 2025 |
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December 31, 2026 |
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December 31, 2027 |
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December 31, 2028 |
Date |
Account Name |
Debit |
Credit |
Date |
Account Name |
Debit |
Credit |
Year |
Miles Driven |
2025 |
27,000 |
2026 |
24,000 |
2027 |
32,000 |
2028 |
22,000 |
Period Ended |
Depreciation Expense |
Accumulated Depreciation |
End of Period Book Value |
December 31, 2025 |
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December 31, 2026 |
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December 31, 2027 |
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December 31, 2028 |
As per guidelines, answering first four
A) Journal Entry for purchase of asset
Date 01 January 2025
Delivery Truck A\c Debit
To Cash/Bank A\C Credit
( Being delivery Truck purchased for cash)
B) Depreciation = (purchase value - salvage value)/usefull life of asset
Therefore Depreciation = (50,000 - 2,000)/4
= 12,000
So, Table will be filled as
Date Depreciation /accumulated/ residual
Dec 31 2025 12000 / 12000 / 38000
2026 12000 / 24000/ 26000
2027 12000 / 36000/ 14000
2028 12000/ 48000/ 2000(scrap value)
C) Journal entry for recording Depreciation
Dec 31 2025 Depreciation expense A/c Debit 12000
To accumulated Depreciation a/c 12000
D) entry for sale of asset
Dec 31st 2027 Cash A_/c debit 18000
Accumulated depreciation a/c debit 36000
To delivery truck a/c 50,000
To profit on sale 4,000
Calculation of accumulated Depreciation
Yearly Depreciation 12000
Usage 3 years
Therefore accumulated Depreciation 12000 × 3 = 36000