Question

2016

Jan.		1		Paid $20,515 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 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 $2,700. 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 $5,500 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.

Answer 1

	Depn for 2016	4060	(20515+1935-2150)/5
1-a	Depreciation for 2017
	Cost less depreciation for 2016	18390
	Less revised salvage value:	2700
	remaining cost to be depreciated:	15690
	Years of life remaining:	3
	Total depreciation for 2017	5230
1-b	Book value at dec 31, 2018	7930
	Sale price of truck	5500
	Loss on sale	2430
Date	Account title and Explanation	Debit	Credit
Jan, 1 2016	Delivery truck	22450
	Cash		22450
	(To record purchase)
Dec, 31 2016	Depreciation expense	4060
	Accumulated Depreciation- Delivery truck		4060
	(To record depreciation)
Dec, 31 2017	Depreciation expense	5230
	Accumulated Depreciation- Delivery truck		5230
	(To record depreciation)
Dec, 31 2018	Depreciation expense	5230
	Accumulated Depreciation- Delivery truck		5230
	(To record depreciation)
Dec, 31 2018	Cash	5500
	Loss on sale of truck	2430
	Delivery truck		7930
	(To record sale of truck)