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 $28,000, paying cash. Nov. 2 Paid garage $635 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 $4,640 for the truck. Year 2 Jan. 6 Purchased a new truck for $49,400, paying cash. Apr. 1 Sold the used truck purchased on Jan. 4 of Year 1 for $15,180. (Record depreciation to date in Year 2 for the truck.) June 11 Paid garage $470 for miscellaneous repairs to the truck. Dec. 31 Recorded depreciation for the new truck. It has an estimated residual value of $9,470 and an estimated life of five years. Year 3 July 1 Purchased a new truck for $55,400, paying cash. Oct. 2 Sold the truck purchased January 6, Year 2, for $17,498. (Record depreciation to date for Year 3 for the truck.) Dec. 31 Recorded depreciation on the remaining truck purchased on July 1. It has an estimated residual value of $12,955 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. Scroll down to access pages 2 and 3 of the journal.

Journalize the Year 1 transactions and adjusting entries on Page 1.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5		Adjusting Entries
6
7

Journalize the Year 2 transactions and adjusting entries on Page 2.

PAGE 2

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11		Adjusting Entries
12
13

Journalize the Year 3 transactions and adjusting entries on Page 3.

PAGE 3

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9		Adjusting Entries
10
11

Answer 1

	Year 1
	Date	Description	Post.Ref	Debit	Credit	Assets	Liabilities	Equity
	4-Jan	Delivery Truck		$28,000		$28,000	0	$0
		Cash			$28,000	($28,000)	0	0
	2-Nov	Truck Repair Expense		$635		0	0	($635)
		Cash			$635	($635)	0	0
	31-Dec	Depreciation Expense - Delivery Truck		$14,000				($14,000)
		Accumulated Depreciation - Delivery Truck			$14,000	($14,000)
		Delivery Truck Depreciation
		(28000-4640)/4		5840
		Depreciation Rate = 5840/23360		25.00%
		Double Declining Rate = 25%*2		50%
		Depreciation = 28000*50%
	Year 2
	Date	Description	Post.Ref	Debit	Credit	Assets	Liabilities	Equity
	6-Jan	Delivery Truck		$49,400		$49,400
		Cash			$49,400	($49,400)
	1-Apr	Depreciation Expense - Delivery Truck		1750				($1,750)
		Accumulated Depreciation -Delivery Truck			1750	($1,750)
		(28000-14000)*50%*3/12
	1-Apr	Accumulated Depreciation - Delivery Truck		$15,750		$15,750
		Cash		$15,180		$15,180
		To Delivery Truck			28000	($28,000)
		To Gain on sale of Delivery Truck			$2,930			$2,930
	11-Jun	Truck Repair Expense		$470				($470)
		To Cash			$470	($470)
	31-Dec	Depreciation Expense - Delivery Truck		$19,760				($19,760)
		Accumulated Depreciation -Delivery Truck			$19,760	($19,760)
		Delivery Truck Depreciation
		(49400-9470)/5		7986
		Depreciation Rate = 7986/39930		20.00%
		Double Declining Rate = 20%*2		40%
		Depreciation = 49400*40%		19760
	Year 3
	Date	Description	Post.Ref	Debit	Credit	Assets	Liabilities	Equity
	1-Jul	Delivery Truck		$55,400		$55,400
		To Cash			$55,400	($55,400)
	2-Oct	Depreciation Expense - Delivery Truck		$8,892				($8,892)
		Accumulated Depreciation -Delivery Truck			$8,892	($8,892)
		(49400-19760)*40%*9/12
	2-Oct	Accumulated Depreciation - Delivery Truck		$28,652
		Cash		$17,498
		Loss on Sale of Delivery Truck		$3,250
		To Delivery Truck			$49,400
	31-Dec	Depreciation Expense - Delivery Truck		$6,925.00				($6,925.00)
		Accumulated Depreciation -Delivery Truck			$6,925.00	($6,925.00)
		Delivery Truck Depreciation
		(55400-12955)/8		5305.625
	42445	Depreciation Rate = 5305.625/42445		0.125
		Double Declining Rate = 12.5%*2		25%
		Depreciation = (55400*25%*6/12)		6925