On January 1, 2011, Greg's Grocery purchased a truck for $41,000 that has an estimated useful...

On January 1, 2011, Greg's Grocery purchased a truck for $41,000 that has an estimated useful life of five years and a $1,000 residual value. Greg uses the straight-line depreciation method. Record the journal entries under each of the following disposal scenarios that may occur on March 31, 2013: a. The truck is in an accident and totaled. It is scrapped for $0. There are no insurance proceeds. b. Greg sells the truck for $10,000 cash. c. Gerg sells the truck and receives $20,000 plus a piece of equipment worth $5,000. d. Greg trades-in the truck for a new truck. The suggested retail price of the new truck is $32,000. e. Greg trades-in the truck plus pays $3,000 for a new truck. The suggested retail price of the new truck is $32,000.

Expert Solution


Cost of assets		41000
Less: Salvage		1000
Depreciable cost		40000
Divide: Life		5
Annual dep		8000
Journal entries:
S.no.	Accounts title and explanations		Debit $	Credit $
Case-a
31.03.13	Depreciation Expense Dr.		2000
	Accumulated depreciation			2000

	Accumulated dep Dr. (8000*2+2000)		18000
	Loss on sale of asset Dr.		23000
	Truck equipment			41000

Case-b
31.03.13	Depreciation Expense Dr.		2000
	Accumulated depreciation			2000

	Accumulated dep Dr. (8000*2+2000)		18000
	Cash account Dr		10000
	Loss on sale of asset Dr.		13000
	Truck equipment			41000

Case-c
31.03.13	Depreciation Expense Dr.		2000
	Accumulated depreciation			2000

	Accumulated dep Dr. (8000*2+2000)		18000
	Cash account Dr		20000
	New Equipment Dr.		5000
	Gain on sale of assets			2000
	Truck equipment			41000

Case-d
31.03.13	Depreciation Expense Dr.		2000
	Accumulated depreciation			2000

	Accumulated dep Dr. (8000*2+2000)		18000
	New Equipment Dr.		32000
	Gain on sale of assets			9000
	Truck equipment			41000

Case-e
31.03.13	Depreciation Expense Dr.		2000
	Accumulated depreciation			2000

	Accumulated dep Dr. (8000*2+2000)		18000
	New Equipment Dr.		32000
	Gain on sale of assets			6000
	Truck equipment			41000
	Cash account			3,000

ekkarill92 answered 2 years ago

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