Question

The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4. Purchased a used delivery truck for $28,400, paying cash. Nov. 2. Paid garage $710 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $4,835 for the truck. Year 2 Jan. 6. Purchased a new truck for $46,800, paying cash. Apr. 1. Sold the used truck for $15,145. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $465 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $8,560 and an estimated life of five years. Year 3 July 1. Purchased a new truck for $52,960, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $16,356. (Record depreciation to date for Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,375 and an estimated useful life of eight years. CHART OF ACCOUNTS Legacy Furniture Co. General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Delivery Truck 124 Accumulated Depreciation-Delivery Truck 125 Equipment 126 Accumulated Depreciation-Equipment 130 Mineral Rights 131 Accumulated Depletion 132 Goodwill 133 Patents LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary Journalize the Year 2 transactions and adjusting entries Journalize the Year 3 transactions and adjusting entries REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Delivery Truck 621 Gain on Sale of Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Delivery Truck 523 Delivery Expense 525 Truck Repair Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Equipment 533 Depletion Expense 534 Amortization Expense-Patents 535 Insurance Expense 536 Supplies Expense 539 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of Delivery Truck 721 Loss on Sale of Equipment

Answer 1

Year	Date	Particulars	Ref No.	Dr.	Cr.
Year 1	01-Jan	Delivery Truck	123	28,400
		Cash	110		28,400
	02-Nov	Truck Repair Expense	525	710
		Cash	110		710
	31-Dec	Depreciation Expense [28400*2/4]	522	14,200
		Accumulated Depreciation - Delivery Truck	124		14,200
Year 2	06-Jan	Delivery Truck	123	46,800
		Cash	110		46,800
	01-Apr	Depreciation Expense [(28400-14200)*(2/4)*(3/12)]	522	1,775
		Accumulated Depreciation - Delivery Truck	124		1,775
	01-Apr	Cash	110	15,145
		Accumulated Depreciation - Delivery Truck (14200+1775)	124	15,975
		Delivery Truck (28400-14200-1775)	123		12,425
		Gain in sale of delivery truck	620		18,695
	11-Jun	Truck Repair Expense	525	465
		Cash	110		465
	31-Dec	Depreciation Expense [46800*(2/5)]	522	18,720
		Accumulated Depreciation - Delivery Truck	124		18,720
Year 3	01-Jul	Delivery Truck	123	52,960
		Cash	110		52,960
	02-Oct	Depreciation Expense [(46800-18720)*(2/5)*(9/12)]	522	8,424
		Accumulated Depreciation - Delivery Truck	124		8,424
	02-Oct	Accumulated Depreciation - Delivery Truck [18720+8424]	124	27,144
		Cash	110	16,356
		Delivery Truck [46800-18720-8424]	123		19,656
		Gain in sale of delivery truck	620		23,844
	31-Dec	Depreciation Expense [52960*(2/8)*(6/12)]	522	6,620
		Accumulated Depreciation - Delivery Truck	124		6,620

Under Double-declining balance method the depreciation is calculated as = Cost or WDV of asset*(2/useful life)*(months of use/12). The salvage value is not considered in double declining balance method of depreciation calculation.

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