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 $28,000, paying cash.
Nov. 2.	Paid garage $675 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 $5,000 for the truck.
Year 2
Jan. 6.	Purchased a new truck for $48,000, paying cash.
Apr. 1.	Sold the used truck for $15,000. (Record depreciation to date in Year 2 for the truck.)
June 11.	Paid garage $450 for miscellaneous repairs to the truck.
Dec. 31.	Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years.
Year 3
July 1.	Purchased a new truck for $54,000, paying cash.
Oct. 2.	Sold the truck purchased January 6, Year 2, for $16,750. (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 $12,000 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	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

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ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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2
3
4
5		Adjusting Entries
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7

Journalize the Year 2 transactions and adjusting entries on Page 2.

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ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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2
3
4
5
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9
10
11		Adjusting Entries
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Journalize the Year 3 transactions and adjusting entries on Page 3.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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2
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9		Adjusting Entries
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Answer 1

LEGACY FURNITURE COMPANY
General journal for Year 1
Date	Account title	Post Ref	Debit	Credit		Asset	=	Liability	+	Equity
Jan.4	Delivery Truck	123	28000			28000
	Cash	110		28000		-28000
	(To record purchase of used truck)
Nov.2	Truck Repair Expense	525	525
	Cash	110		525		-525				-525
	(To record repair expense for the truck)
Dec.31	Depreciation expense - Delivery Truck	522	14000							-14000
	Accumulated Depreciation - Delivery Truck	124		14000		-14000
	(To record depreciation expense for the truck - DDB method )
LEGACY FURNITURE COMPANY
General journal for Year 2
Date	Account title	Post Ref	Debit	Credit		Asset	=	Liability	+	Equity
Jan.6	Delivery Truck	123	48000			48000
	Cash	110		48000		-48000
	(To record return of goods to Taaco. Co.)
Apr.1	Depreciation expense - Delivery Truck	522	1750							-1750
	Accumulated Depreciation - Delivery Truck	124		1750		-1750
	(To record depreciation on the used delivery truck)
Apr.1	Cash	110	15000			15000
	Accumulated Depreciation - Delivery Truck	124	15750			15750
	Delivery Truck	123		28000		-28000
	Gain on sale of delivery truck	620		2750						2750
	(To record sale of used truck)
Jun.11	Truck Repair Expense	110	450							-450
	Cash			450		-450
	(To record payment for misc. Repair expense)
Dec.31	Depreciation expense - Delivery Truck		19200							-19200
	Accumulated Depreciation - Delivery Truck			19200		-19200
	(To record depreciation expense for the truck - DDB method )
LEGACY FURNITURE COMPANY
General journal for Year 3
Date	Account title	Post Ref	Debit	Credit		Asset	=	Liability	+	Equity
July.1	Delivery Truck	123	54000			48000
	Cash	110		54000		-48000
	(To record return of goods to Taaco. Co.)
Oct.2	Depreciation expense - Delivery Truck	522	8640							-8640
	Accumulated Depreciation - Delivery Truck	124		8640		-8640
	(To record depreciation on the used delivery truck)
Oct.2	Cash	110	16750			16750
	Accumulated Depreciation - Delivery Truck	124	27840			27840
	Loss on sale of truck	720	3410							-3410
	Delivery Truck	123		48000		-48000
	(To record sale of used truck)
Dec.31	Depreciation expense - Delivery Truck		6750							-6750
	Accumulated Depreciation - Delivery Truck			6750		-6750
	(To record depreciation expense for the truck - DDB method )

Working:

Truck 1
Cost	28000
Date of purchase	Jan.4, year 1
Estimated life	4 years
Double declining rate	50%
Depreciation for year 1	14000
Net value as at Dec.31, year 1	14000
Date of sale	Apr.1, year 2
Period of usage in year 2	3 months
Depreciation for year 2	1750
(14,000 x 50% x 3 / 12)
Net value at the time of sale	12250
Sale value	15000
Gain on sale	2750
Truck 2
Cost	48000
Date of purchase	Jan.6, year 2
Estimated life	5 years
Double declining rate	40%
Depreciation for year 2	19200
Net value as at Dec.31, year 2	28800
Date of sale	Oct.2, year 3
Period of usage in year 3	9 months
Depreciation for year 3	8640
(28,800 x 40% x 9 / 12)
Net value at the time of sale	20160
Sale value	16750
Loss on sale	3410
Truck 3
Cost	54000
Date of purchase	July1, year 3
Estimated life	8 years
Double declining rate	25%
Depreciation for year 2 (6 months)	6750
Net value as at Dec.31, year 2	47250