Question

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

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 $2,300 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 $2,550. 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 $5,600 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.

Calculate depreciation for year 2017.

	Total cost Less accumulated depreciation (from 2016) Book value Less revised salvage value Remaining cost to be depreciated Years of life remaining Total depreciation for 2017 0

Calculate book value and gain (loss) for sale of Truck on December, 2018.

	Depreciation expense (for 2016) Depreciation expense (for 2017) Depreciation expense (for 2018) Accumulated depreciation 12/31/2018 0 Book value of truck at 12/31/2018 Total cost Accumulated depreciation Book value 12/31/2018

1

Record the total cost of the new delivery truck.

2

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

3

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

4

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

5

Record the sale of the delivery truck for $5,600 cash.

Answer 1

	Straight line depreciation = (cost - salvage value)/estimated useful life
	total cost of Truck
	cash paid			23,515
	Sales tax			1,485
	total cost of Truck			25,000
	Depreciation for year 2016 = (25,000-2,300)/5
			4540
	Depreciation for year 2017
	Book value at beginning of the year (25000-4540)=					20460
	Salvage value					-2,550
						17910
	Remaining useful life (4 years - 1 year)					3
	Depreciation expense					5970
1-a)	total cost					25,000
	lessAccumulated depreciation (from 2016)					4,540
	book value					20,460
	less revised salvage value					2,550
	remaining cost to be depreciated					17,910
	years of life remaining					3
	total depreciation for 2017					5,970
1-b)	Depreciation expense (for 2016)					4,540
	Depreciation expense (for 2017)					5,970
	Depreciation expense (for 2018)					5,970
	Accumulated depreciation 12/31/2018					16,480
	Book value of truck at 12/31/2018
	total cost					25,000
	Accumulated depreciation 12/31/2018					16,480
	Book value of truck at 12/31/2018					8,520
	Book value of truck at 12/31/2018					8,520
	Cash received from sale of truck					5,600
	loss on sale of truck					2,920
1-c	Journal Entries
	Date	Accounting titles & Explanations				Debit	Credit
	1/1/2016	Truck				25,000
		cash					25,000
	12/31/2016	Depreciation expense				4,540
		Accumulated Depreciation					4,540
	12/31/2017	Depreciation expense				5,970
		Accumulated Depreciation					5,970
	12/31/2018	Depreciation expense				5,970
		Accumulated Depreciation					5,970
	12/31/2018	cash				5,600
		Accumulated depreciation				16,480
		Loss on disposal				2,920
		Truck					25,000