In: Accounting
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.
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 | |||||