Question

Yoshi Company completed the following transactions and events involving its delivery trucks. 2016 Jan. 1 Paid $25,015 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 $2,850. 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

Required 1A Calculate depreciation for year 2017

Total Cost

Less accumulated depreciation (form 2016)

Book value

Less revised salvage value

Remaining cost to be depreciated

Years of life remainining

Total depreciation for 2017

Required 1B Calculate book value and gain (loss) for sale of Truck on December, 2018

Depreciation expense (for 2016)

Depreciation e xpense (for 2017)

Depreciation expense (for 2018)

Accumulated depreciation 12/31/2018

Book value of truck at 12/31/2018

Total Cost

Accumulated depreciation

Book value 12/31/2018

Required 1C Prepare journal entries to record these transactions and events

Answer 1

1A	Calculate depreciation for year 2017
		Total cost		$                  26,800
	Less:	Accumulated depreciation from 2016		$                     4,930
		Book Value		$                  21,870
	Less:	Revised salvage value		$                     2,850
		Remaining cost to be depreciated		$                  19,020
		Years of life remaining		3 years
		Total depreciation for 2017 ( $ 19,020 / 3 years)		$                     6,340
		Working Notes
	1	Total cost	=	$ 25,015 + $ 1,785
			=	$26,800
	2	Accumulated depreciation from 2016	=	($26800- $2150)/5
			=	$4,930
1B	Calculate Book Value and Gain (Loss) for sale of Truck on December, 2018
	Depreciation Expense (for 2016)			$                     4,930
	Depreciation Expense (for 2017)			$                     6,340
	Depreciation Expense (for 2018)			$                     6,340
	Accumulated depreciation 12/31/2018			$                  17,610
	Book Value of Truck at 12/31/2018			$                     9,190
	Total Cost			$                  26,800
	Accumulated depreciation			$                  17,610
	Book Value of Truck at 12/31/2018			$                     9,190
	Sale proceeds			$                     5,400
	Loss on sale of Truck ( $ 9,190 - $ 5,400)			$                     3,790
1C	Journal Entries
	Date	Particulars	Debit	Credit
	2016
	01-Jan	Delivery Truck	$                  26,800
		Cash		$                  26,800
		(Being Delivery Truck cost recorded)
	31-Dec	Depreciation Expense -Delivery Truck	$                    4,930
		Accumulated Depreciation - Delivery Truck		$                     4,930
		(Being Depreciation Recorded)
	2017
	31-Dec	Depreciation Expense -Delivery Truck	$                    6,340
		Accumulated Depreciation - Delivery Truck		$                     6,340
		(Being Depreciation Recorded)
	2018
	31-Dec	Depreciation Expense -Delivery Truck	$                    6,340
		Accumulated Depreciation - Delivery Truck		$                     6,340
		(Being Depreciation Recorded)
	31-Dec	Cash	$                    5,400
		Accumulated Depreciation - Delivery Truck	$                  17,610
		Loss on Sale	$                    3,790
		Delivery Truck		$                  26,800
		(Being Delivery Truck sold for $ 5,400 cash)