Question

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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 $27,200, paying cash.
Nov. 2.	Paid garage $630 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 $5,005 for the truck.
Year 2
Jan. 6.	Purchased a new truck for $49,250, paying cash.
Apr. 1.	Sold the used truck for $14,670. (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 $8,950 and an estimated life of five years.
Year 3
July 1.	Purchased a new truck for $53,920, paying cash.
Oct. 2.	Sold the truck purchased January 6, Year 2, for $17,125. (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 $12,945 and an estimated useful life of eight years.

Journalize the Year 1 transactions and adjusting entries on Page 1.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5		Adjusting Entries
6
7

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

PAGE 2

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11		Adjusting Entries
12
13

Journalize the Year 3 transactions and adjusting entries on Page 3.

PAGE 3

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9		Adjusting Entries
10
11

Answer 1

Date	Descrption	Post Ref	Debit	Credit	Asset	Liabilities	Equity
Jan-01	Delivery Truck		$27200		Increase
	Cash			$27200	Decrease
Nov-02	Truck Repair Expense		$630				Decrease
	Cash			$630	Decrease
Dec-31	Depreciation on Truck		$13600				Decrease
	Accumulated Depreciation on Truck			$13600	Decrease
	27200x1/4x2= 13600
Jan-06	Delivery Truck		$49250		Increase
	Cash			$49250	Decrease
Apr-01	Depreciation On Truck		$1700				Decrease
	Accumulated Depreciation on Truck			$1700	Decrease
	27200-13600= [13600x(1/4x2)x3/12]
	Here Book value is 13600 and depreciation is taking for 3 months.
	Accumulated Depreciation On Truck		$15300		Increase
	Cash		$14670		Increase
	Delivery Truck			$27200	Decrease
	Gain on Sales of Delivery Truck			$2770			Increase
Jun-11	Truck Repair Expense		$450				Decrease
	Cash			$450	Decrease
Dec-31	Depreciation On truck		$19700				Decrease
	Accumulated Depreciation On truck			$19700	Decrease
	49250x 1/5x 2
Jul-01	Delivery Truck		$53920		Increase
	Cash			$53920	Decrease
Oct-02	Depreciation on Truck		$8865				Decrease
	Accumulated Depreciation on Truck			$8865	Decrease
	49250-19700=29550x1/5x2x9/12
	Accumulated Depreciation on Truck		$28565		Increase
	Cash		$17125		Increase
	Loss on sale of Truck		$3560				Decrease
	Delivery Truck			$49250	Decrease
Dec-31	Depreciation Expense on Truck		$6740				Decrease
	Accumulated Depreciation On Truck			$6740	Decrease
	[53920x(1/8x2) x(6/12)]

Jan-01	Purchased a used delivery truck for $27,200, paying cash.
	Delivery Truck Asset Increased and Cash Asset Decreased
Nov-02	Paid garage $630 for miscellaneous repairs to the truck.
	Repair Expense affect in net income so equity will be decreased, Cash Asset Decreased
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 $5,005 for the truck.
	Depreciation is an expense and it decrease equity, accumulated depreciation will affect delivery truck asset value and it is treated as decrease in asset
Jan-06	Purchased a new truck for $49,250, paying cash.
	Delivery Truck Asset Increased and Cash Asset Decreased
Apr-01	Sold the used truck for $14,670. (Record depreciation to date in Year 2 for the truck.)
	when recording depreciation expense accumulated depreciation considered as a decrease in asset. But when truck sells accumulatd depreciation asset is increasing, cash asset in creasing , delivery truck asset is decreasing, and also gain on sale of asset will make a increase in equity
Jun-11	Paid garage $450 for miscellaneous repairs to the truck.
	Repair Expense affect in net income so equity will be decreased, Cash Asset Decreased
Dec-31	Record depreciation for the new truck. It has an estimated residual value of $8,950 and an estimated life of five years.
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