Question

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

2016

Jan.		1		Paid $23,515 cash plus $1,785 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 $5,400 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.

	Total cost Less accumulated depreciation (from 2016) Book value Less revised salvage value Remaining cost to be depreciated Years of life remaining Total depreciation for 2017 0

Depreciation expense (for 2016) Depreciation expense (for 2017) Depreciation expense (for 2018) Accumulated depreciation 12/31/2018 0 Book value of truck at 12/31/2018 Total cost Accumulated depreciation Book value 12/31/2018

1-Record the total cost of the new delivery truck.

2-Record the year-end adjusting entry for the depreciation expense of the delivery truck.DEC 31,2016

3-Record the year-end adjusting entry for the depreciation expense of the delivery truck.DEC 31,2017

4-Record the year-end adjusting entry for the depreciation expense of the delivery truck. DEC 31,2018

5-Record the sale of the delivery truck for $5,400 cash.

	Date General Journal Debit Credit Dec 31, 2018

Answer 1

Q1
	Particulars	$	Calculation & Remarks
	Total Cost	25,300.00	23515+1785
Less	Accumulated Depreciation (from 2016)	4,630.00	(25300-2150)/5
	Book Value	20,670.00	25300-4630
Less	Revised Salvage Value	2,700.00	Given
	Remaining cost to be depreciated	17,970.00	20670-2700
	Years of life remaining	3 Yrs	4Yrs- 1 Yr
	Depreciation for 2017	5,990.00	(17970-2700)/3
	Total Accumulated Depreciation for 2017	10,620.00	4630+5990
Q2
	Depreciation Expense (for 2016)	4,630.00	(25300-2150)/5
	Depreciation Expense (for 2017)	5,990.00	(17970-2700)/3
	Depreciation Expense (for 2018)	5,990.00	(17970-2700)/3
	Accumulated Depreciation Dec 31, 2018	16,610.00
	Total Cost	25,300.00
	Accumulated Depreciation	16,610.00
	Book value of Truck Dec 31, 2018	8,690.00
	Sale Value of Truck	5,400.00
Less	Book Value of Truck	8,690.00
	Loss on Sale of Truck	(3,290.00)
Q3
Date	General Journal	Debit	Credit
2016		$	$
Jan 1, 2016	Delivery Truck Account	25,300.00
	Cash		25,300.00
	(being cost of the new delivery truck)
Dec 31, 2016	Depreciation	4,630.00
	Accumulated Depreciation		4,630.00
	(being depreciation accounted for 2016)
2017
Dec 31, 2017	Depreciation	5,990.00
	Accumulated Depreciation		5,990.00
	(being depreciation accounted for 2017)
2018
Dec 31, 2018	Depreciation	5,990.00
	Accumulated Depreciation		5,990.00
	(being depreciation accounted for 2018)
Dec 31, 2018	Accumulated Depreciation	16,610.00
	Delivery Truck Account		16,610.00
	(being accumulated depreciation chargerd)
Dec 31, 2018	Cash	5,400.00
	Loss on sale of Truck	3,290.00
	Delivery Truck Account		8,690.00
	(being sale of delivery truck for 5400)

Notes:

1. All expenses incurred while purchasing an asset till the date of put to use shall be capitalized in the Asset Account. hence Sales tax paid on Purchase of delivery truck shall be capitalized in delivery truck account and treated as cost of the asset.

2. Calculation of revised Depreciation:

Trucks book value after one year of depreciation at the old rate is 25300-4630=20670

with that change in the assets estimated useful life (change inn accounting estimate) company would now recognize 5990 in the depreciation expense on these asset each year for the next 3 years.

ie, 20670-2700/3 = 5990

Total Depreciation will remain the same.

5990 x 3=17970+4630=22600

Depreciated amount: 25300-2700=22600