ctions for Fixed Assets, Including Sale 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 $15,360, paying cash. Nov. 2 Paid garage $170 for miscellaneous repairs to the truck. Dec. 31 Recorded depreciation on the truck for the year. The estimated useful life of the truck is 4 years, with a residual value of $3,200 for the truck. Year 2
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Transactions for Fixed Assets, Including Sale
The following transactions and
| Year 1 | |
| Jan. 4 | Purchased a used delivery truck for $15,360, paying cash. |
| Nov. 2 | Paid garage $170 for miscellaneous repairs to the truck. |
| Dec. 31 | Recorded depreciation on the truck for the year. The estimated useful life of the truck is 4 years, with a residual value of $3,200 for the truck. |
| Year 2 | |
| Jan. 6 | Purchased a new truck for $9,000, paying cash. |
| Apr. 1 | Sold the used truck purchased on January 4 of Year 1 for $6,270. (Record depreciation to date in Year 2 for the truck.) |
| June 11 | Paid garage $430 for miscellaneous repairs to the truck. |
| Dec. 31 | Record depreciation for the new truck. It has an estimated residual value of $1,600 and an estimated life of 5 years. |
| Year 3 | |
| July 1 | Purchased a new truck for $90,000, paying cash. |
| Oct. 2 | Sold the truck purchased January 6, Year 2, for $3,480. (Record depreciation to date for Year 3 for the truck.) |
| Dec. 31 | Recorded depreciation on the remaining truck purchased on July 1. It has an estimated residual value of $16,200 and an estimated useful life of eight years. |
Required:
Journalize the transactions and the adjusting entries. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations. Round your final answers to the nearest cent.
| Year 1 Jan. 4 |
|
Delivery Truck | Delivery Truck |
|
|
Cash | Cash | |
| Nov. 2 |
|
Truck Repair Expense | Truck Repair Expense |
|
|
Cash | Cash | |
| Dec. 31 |
|
Depreciation Expense-Delivery Truck | Depreciation Expense-Delivery Truck |
|
|
Accumulated Depreciation-Delivery Truck | ||
| Year 2 Jan. 6 |
|
Delivery Truck | Delivery Truck |
|
|
Cash | Cash | |
| Apr. 1-Deprec. |
|
Depreciation Expense-Delivery Truck | Depreciation Expense-Delivery Truck |
|
|
Accumulated Depreciation-Delivery Truck | Accumulated Depreciation-Delivery Truck | |
| Apr. 1-Sale |
|
Accumulated Depreciation-Delivery Truck | Accumulated Depreciation-Delivery Truck |
|
|
Cash | Cash | |
|
|
Loss on Sale of Delivery Truck | Loss on Sale of Delivery Truck | |
|
|
Delivery Truck | Delivery Truck | |
| June 11 |
|
Truck Repair Expense | Truck Repair Expense |
|
|
Cash | Cash | |
| Dec. 31 |
|
Depreciation Expense-Delivery Truck | Depreciation Expense-Delivery Truck |
|
|
Accumulated Depreciation-Delivery Truck | Accumulated Depreciation-Delivery Truck | |
| Year 3 July 1 |
|
Delivery Truck | Delivery Truck |
|
|
Cash | Cash | |
| Oct. 2-Deprec. |
|
Depreciation Expense-Delivery Truck | Depreciation Expense-Delivery Truck |
|
|
Accumulated Depreciation-Delivery Truck | Accumulated Depreciation-Delivery Truck | |
| Oct. 2-Sale |
|
Cash | Cash |
|
|
Accumulated Depreciation-Delivery Truck | Accumulated Depreciation-Delivery Truck | |
|
|
Loss on Sale of Delivery Truck | Loss on Sale of Delivery Truck | |
|
|
Delivery Truck | Delivery Truck | |
| Dec. 31 |
|
Depreciation Expense-Delivery Truck | Depreciation Expense-Delivery Truck |
|
|
Accumulated Depreciation-Delivery Truck | Accumulated Depreciation-Delivery Truck |
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