Greg’s Tunes purchased a truck on January 1, 2011, for $41,000. The truck’s expected useful life was 5 years, and the expected residual value is $1,000. The business uses straight-line depreciation and $16,000 has been recorded in total accumulated depreciation through December 31, 2012. Required: A. Prepare Greg’s Tunes’ journal entries on March 31, 2013, in each of the following cases: a. The truck is in an accident and is totaled. The truck is completely worthless and must be scrapped for $0. b. Greg’s Tunes sells the truck for $10,000 cash. c. Greg’s Tunes sells the truck to Harry’s Hot Dogs. Harry’s gives Greg’s $20,000 cash and a piece of equipment worth $5,000. d. Greg’s Tunestrades the old truck in for a new Toyota truck. The fair market value of the Toyota truck is $32,000.
Greg’s Tunes purchased a truck on January 1, 2011, for $41,000. The truck’s expected useful life was 5 years, and the expected residual value is $1,000. The business uses straight-line
Required:
A. Prepare Greg’s Tunes’
a. The truck is in an accident and is totaled. The truck is completely worthless and must be
scrapped for $0.
b. Greg’s Tunes sells the truck for $10,000 cash.
c. Greg’s Tunes sells the truck to Harry’s Hot Dogs. Harry’s gives Greg’s $20,000 cash and a
piece of equipment worth $5,000.
d. Greg’s Tunestrades the old truck in for a new Toyota truck. The fair market value of the Toyota truck is $32,000.
B. At the beginning of 2012, Logan Services purchased a Xerox copy machine for $40,400. Logan Services expects the machine to last for four years (160,000 copies) and to have a residual value of $2,000. Logan Services expects the machine to make 30,000 copies during the first year and 50,000 copies during the second year.
Required:
Compute the first and second-year depreciation on the machine using the following methods:
a. Straight-line
b. Units-of-production
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