Question

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

Year 1

Jan.		1		Paid $22,015 cash plus $1,785 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec.		31		Recorded annual straight-line depreciation on the truck.

Year 2

Dec.

31

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.

Year 3

Dec.		31		Recorded annual straight-line depreciation on the truck.
Dec.		31		Sold the truck for $5,500 cash.

Required:
1-a. Calculate depreciation for Year 2.
1-b. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3.
1-c. Prepare journal entries to record these transactions and events.

• Required 1A
• Required 1B
• Required 1C

Calculate depreciation for Year 2.

	Total cost Less accumulated depreciation (from Year 1) Book value Less revised salvage value Remaining cost to be depreciated Years of life remaining Total depreciation for Year 2

Calculate book value and gain (loss) for sale of Truck on December 31, Year 3.

	Depreciation expense (for Year 1) Depreciation expense (for Year 2) Depreciation expense (for Year 3) Accumulated depreciation 12/31/Year 3 Book value of truck at 12/31/Year 3 Total cost Accumulated depreciation Book value 12/31/Year 3

Journal entry worksheet

• Record the total cost of the new delivery truck.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jan 01, Year 1

Answer 1

Answer
1-a)
Total Cost (22015+1785)	$                  23,800
Less: Accumulated Depreciation (Year 1)	$                  -4,360
(23800-2000)/5)
Book Value	$                  19,440
Less: Revised Salvage Value	$                  -2,700
Remaining cost to be depreciated	$                  16,740
Years of life remaining	$                           3
Total Depreciation for year 2	$                    5,580
1-b)
Book value at beginning of year 3	$                    4,360
Less: Depreciation for year 3	$                    5,580
book value at end of year 3	$                    5,580
Accumulated Depreciation 12/31/Year 3	$                  15,520
Total Cost	$                  23,800
Book Value 12/31/Year 3	$                    8,280
Less : Sale value of truck	$                  -5,500
Loss on sale of truck	$                    2,780

1-c)
Journal entry
Date	Account Title	Debit	Credit
1/1/ year 1	Truck	$      23,800
	To, Cash		$      23,800
	(To record purchase of delivery truck)
31/12/ year 1	Depreciation Expense	$        4,360
	To, Accumulated Depreciation		$        4,360
	(To record depreciation expense for year 1)
31/12/ year 2	Depreciation Expense	$        5,580
	To, Accumulated Depreciation		$        5,580
	(To record depreciation expense for year 2)
31/12/ year 3	Depreciation Expense	$        4,360
	To, Accumulated Depreciation		$        4,360
	(To record depreciation expense for year 3)
31/12/ year 3	Cash	$        5,500
	Accumulated Depreciation	$      15,520
	Loss on sale of Delivery Truck	$        2,780
	To, Delivery Truck		$      23,800
	(To record sale of Delivery truck )