Question

Problem 10-5A Computing and revising depreciation; selling plant assets LO C2, P1, P2

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 $2,450 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 $2,550. 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 $5,500 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

Required 1B

Required 1C

Calculate depreciation for year 2017.

	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

Required 1B

Required 1C

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

Depreciation expense (for 2016) Depreciation expense (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 Prepare journal entries to record these transactions and events. Journal entry worksheet Record the total cost of the new delivery truck. Journal entry worksheet Record the year-end adjusting entry for the depreciation expense of the delivery truck.

Journal entry worksheet

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

Journal entry worksheet

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

Journal entry worksheet

Record the sale of the delivery truck for $5,500 cash.

Answer 1

Solution:

2016:

Cost of delivery trucks = $23,515 + $1,785 = $25,300

Estimated salvage value = $2,450

Estimated life = 5 years

Depreciation for 2016 = ($25,300 - $2,450)/5 = $4,570

Computation of Depreciation for 2017
Particulars	Amount
Total Cost	$25,300.00
Less: Accumlated depreciation 2016	$4,570.00
Book value	$20,730.00
Less: Revised Salvage Value	$2,550.00
Remaining cost to be depreciated	$18,180.00
Years of life remaining (4-1)	3
Depreciation for 2017	$6,060.00
Book Value at end of 2017	$14,670.00

Computation of Book Value for Dec 2018 and gain/(loss) on sale of Truck
Particulars	Amount
Book Value at end of 2017	$14,670.00
Less: Depreciation for 2018	$6,060.00
Book value at end of 2018	$8,610.00
Sale value of Truck	$5,500.00
Loss on sale of Truck	-$3,110.00

Journal Entry
Date	Particulars	Debit	Credit
1-Jan-16	Truck A/c Dr	$25,300.00
	To Cash A/c		$25,300.00
	(Being Truck purchased for cash)		$24,800,000.00
31-Dec-16	Depreciation A/c Dr	$4,570.00
	To Accumlated Depreciation A/c		$4,570.00
	(Being depreciation recorded for 2016)
31-Dec-17	Depreciation A/c Dr	$6,060.00
	To Accumlated Depreciation A/c		$6,060.00
	(Being depreciation recorded for 2017)
31-Dec-18	Depreciation A/c Dr	$6,060.00
	To Accumlated Depreciation A/c		$6,060.00
	(Being depreciation recorded for 2018)
31-Dec-18	Cash A/c Dr	$5,500.00
	Accumlated Depreciation A/c Dr	$16,690.00
	Loss on sale of truck A/c Dr	$3,110.00
	To Truck A/c		$25,300.00
	(Being truck sold and loss recorded)