Answered: Record the journal entry for…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 8PB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...

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Promise Trucking Corporation uses the units-of-production depreciation method because units-of-production best measures wear and tear on the trucks. Consider these facts about one Mack truck in the company's fleet.

data facts:

When acquired in 2015, the rig cost $370,000
and was expected to remain in service for 10 years or 1,000,000 miles. Estimated residual value was

$140,000.

The truck was driven 85,000 miles in 2015, 125,000
miles in 2016, and 165,000 miles in 2017.
After 40,000 miles, on March 15, 2018, the company traded in the Mack truck for a less expensive Freightliner.

Promise

also paid cash of $28,000.
Fair market value of the Mack truck was equal to its net book value on the date of the trade.

Requirements:

1.	Record the journal entry for depreciation expense in 2018.
2.	Determine Promise's cost of the new truck.
3.	Record the journal entry for the exchange of assets on MarchMarch 15, 2018. Assume the exchange had commercial substance.

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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