Yoshi Company completed the following transactions and events involving its delivery trucks. Year 1 Jan. 1 Paid $20,515 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. Year 2 Dec. 31 The truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,400. Recorded annual straight-line depreciation on the truck. Year 3 Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for $5,300 cash. Required: 1-a. Calculate depreciation for Year 2. 1-b. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3. 1-c. Prepare journal entries to record these transactions and events.
Answers
1a. Particulars Amount
Total cost $22,000
Less: Accumulated depreciation (from 2016)$4,000
Book value $18,000
Less Revised salvage value $2,400
Remaining cost to be depreciated $15,600
/ Years of life remaining 3 years
Total depreciation for 2017 $5,200
1b. Particulars Amount
Depreciation expense (for 2016) 4,000
Depreciation expense (for 2017) 5,200
Depreciation expense (for 2018) 5,200
Accumulated depreciation 12/31/2018 14,400
Book value of truck at 12/31/2018
Total cost 22,000
Accumulated depreciation (14,400)
Book value 12/31/2018 7,600
Truck sold 5,300
Loss on sale of truck 2,300
2. Date General Journal Debit$ Credit$
2016
Jan. 1 Trucks 22,000
Cash 22,000
Dec. 31Depreciation expense-Trucks 4,000
Accumulated depreciation-Trucks 4,000
(22,000 - 2,000) / 5
2017
Dec. 31 Depreciation expense-Trucks (Note 1) 5,200
Accumulated depreciation-Trucks 5,200
2018
Dec. 31 Depreciation expense-Trucks 5,200
Accumulated depreciation-Trucks 5,200
Dec. 31 Cash 5,300
Accumulated depreciation-Trucks 14,400
Loss on disposal of trucks (Note 2) 2,300
Trucks 22,000
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