Your business operates on January 1 to December 31 calendar year basis. On April 1, 2020 you purchased a new delivery truck for your business. The truck was imported from India. The price of the truck is $50,000. Other costs related to truck are as follows: insurance during transporatation $2,000, painting and lettering your company logo $500, one year road insurance $1,000, sales taxes and fees $2,500, oil and lubricants for the truck $500, import taxes $5,000. The truck's estimated useful life is 7 years and you expect that the salvage value of the truck will be $1,000. It will be depreciated using the double declining method. Your task: Using the double declining method, prepare a full depreciation schedule for the truck. Assume that on December 31, 2024, you sell this truck for $12,000. Prepare a journal entry for this sale. Assume on December 31, 2025 the truck is destroyed in an accident and have to be disposed with no salvage. Prepare a journal entry for the disposal. Assume that on August 1, 2024, you decide to change your depreciation estimates. The new depreciation will be using the straight-line method, total useful life of the truck is estimated to be 9 years and new salvage value is estimated to be $500. Prepare a depreciation schedule for the truck using straight-line depreciation.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 2EB: Johnson, Incorporated had the following transactions during the year: Purchased a building for...

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Your business operates on January 1 to December 31 calendar year basis.

On April 1, 2020 you purchased a new delivery truck for your business. The truck was imported from India. The price of the truck is $50,000.

Other costs related to truck are as follows: insurance during transporatation $2,000, painting and lettering your company logo $500, one year road insurance $1,000, sales taxes and fees $2,500, oil and lubricants for the truck $500, import taxes $5,000.

The truck's estimated useful life is 7 years and you expect that the salvage value of the truck will be $1,000. It will be depreciated using the double declining method.

Your task:

Using the double declining method, prepare a full depreciation schedule for the truck.
Assume that on December 31, 2024, you sell this truck for $12,000. Prepare a journal entry for this sale.
Assume on December 31, 2025 the truck is destroyed in an accident and have to be disposed with no salvage. Prepare a journal entry for the disposal.
Assume that on August 1, 2024, you decide to change your depreciation estimates. The new depreciation will be using the straight-line method, total useful life of the truck is estimated to be 9 years and new salvage value is estimated to be $500. Prepare a depreciation schedule for the truck using straight-line depreciation.

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