menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the asset’s life, and create the journal entry for years 6–10 (the entry will be the same for each of the five years).

FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 11, Problem 13PB
Textbook Problem
1 views

Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the asset’s life, and create the journal entry for years 6–10 (the entry will be the same for each of the five years).

To determine

Introduction:

Depreciation is reduction in the value of fixed assets due to its regular use. Depreciation is charged to income statement as an expense.

To compute:

The depreciation expense before and after the revision of the salvage value of asset. Also prepare journal entry for sixth to tenth years.

Explanation of Solution

Computation of depreciation expense:

Depreciation expense can be computed by using the following formula,

Depreciation Expense=Cost of AssetSalvage ValueEconomic Life of the Asset

Substitute $20,000 for the cost of asset, $8,000 for salvage value, and 10 Years for the economic life of the asset, in the above formula.

Depreciation Expense=$20,000$8,00010=$12,00010=$1,200

Computation of depreciation expense after revision to be charged in the final five years of the asset’s life:

Particulars Amount ($)
Original cost 20,000
Less: Depreciation charged earlier ($1,200×5) 6,000
Book value in the beginning of Year 6 14,000
New salvage value 10,000
Balance economic life (Years) 5
Revised depreciation expense ($14,000$10,0005) 800

Table (1)

Record depreciation expense for Year 6th:

Date Account Debit ($) Credit ($)
Year 6 Depreciation Expense-Delivery Truck 800
Accumulated Depreciation- Delivery Truck 800
(To record depreciation expense.)

Table (2)

  • Depreciation is an expense and it is increased by $800. Therefore, Depreciation Expense-Delivery Truck is debited with $800.
  • Accumulated Depreciation-Delivery Truck is a contra asset and it is increased by $800. Therefore, Accumulated Depreciation-Delivery Truck is credited with $800.

Record depreciation expense for Year 7th:

Date Account Debit ($) Credit ($)
Year 7 Depreciation Expense-Delivery Truck 800
Accumulated Depreciation- Delivery Truck 800
(To record depreciation expense

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 11 Solutions

Principles of Accounting Volume 1
Show all chapter solutions
add
Ch. 11 - How are intangible assets with an indefinite life...Ch. 11 - If the market value of goodwill is found to be...Ch. 11 - Which of the following represents an event that is...Ch. 11 - Which of the following is true regarding special...Ch. 11 - The loss in value from all causes within a...Ch. 11 - What is the difference between tangible and...Ch. 11 - Define intangible assets.Ch. 11 - What is the difference between a patent and a...Ch. 11 - What is goodwill, and how is it generated?Ch. 11 - For each of the following transactions, state...Ch. 11 - What amounts should be recorded as a cost of a...Ch. 11 - Describe the relationship between expense...Ch. 11 - Define natural resources.Ch. 11 - Explain the difference between depreciation,...Ch. 11 - Explain the differences between the process of...Ch. 11 - What is goodwill, and what are the unique aspects...Ch. 11 - What are some examples of special issues in...Ch. 11 - What is the difference between functional...Ch. 11 - Fombell, Incorporated has the following assets in...Ch. 11 - Jada Company had the following transactions during...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Steele Corp. purchases equipment for $25,000....Ch. 11 - Calico Inc. purchased a patent on a new drug. The...Ch. 11 - Alfredo Company purchased a new 3-D printer for...Ch. 11 - Using the information from EA7, calculate...Ch. 11 - Santa Rosa recently purchased a new boat to help...Ch. 11 - Warriors Productions recently purchased a...Ch. 11 - The following intangible assets were purchased by...Ch. 11 - Sand River Sales has a fork truck used in its...Ch. 11 - New Carlisle, Incorporated, has the following...Ch. 11 - Johnson, Incorporated had the following...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Steele Corp. purchases equipment for $30,000....Ch. 11 - Calico Inc. purchased a patent on a new drug it...Ch. 11 - Kenzie purchased a new 3-D printer for $450,000....Ch. 11 - Using the information from EB7, calculate...Ch. 11 - Ronson recently purchased a new boat to help ship...Ch. 11 - Warriors Production recently purchased a copyright...Ch. 11 - The following intangible assets were purchased by...Ch. 11 - Baglias Wholesale Trinkets has a 3-D printer used...Ch. 11 - Selected accounts from Phipps Corporations trial...Ch. 11 - Selected accounts from Han Corporations trial...Ch. 11 - During the current year, Alanna Co. had the...Ch. 11 - During the current year, Arkells Inc. made the...Ch. 11 - Jada Company had the following transactions during...Ch. 11 - Gimli Miners recently purchased the rights to a...Ch. 11 - Tree Lovers Inc. purchased 100 acres of woodland...Ch. 11 - Referring to PA7 where Kenzie Company purchased a...Ch. 11 - For each of the following unrelated situations,...Ch. 11 - Buchanan Imports purchased McLaren Corporation for...Ch. 11 - Montezuma Inc. purchases a delivery truck for...Ch. 11 - Garcia Co. owns equipment that costs $76,800, with...Ch. 11 - Colquhoun International purchases a warehouse for...Ch. 11 - Selected accounts from Hanna Corporations trial...Ch. 11 - Selected accounts from Boxwood Corporations trial...Ch. 11 - During the current year, Alanna Co. had the...Ch. 11 - During the current year, Arkells Inc. made the...Ch. 11 - Johnson, Incorporated, had the following...Ch. 11 - Underwoods Miners recently purchased the rights to...Ch. 11 - Tree Lovers Inc. purchased 2,500 acres of woodland...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Prepare the assets section of the balance sheet as...Ch. 11 - For each of the following unrelated situations,...Ch. 11 - On May 1, 2015, Zoe Inc. purchased Branta Corp....Ch. 11 - Farm Fresh Agriculture Company purchased Sunny...Ch. 11 - Montezuma Inc. purchases a delivery truck for...Ch. 11 - Garcia Co. owns equipment that costs $150,000,...Ch. 11 - Urquhart Global purchases a building to house its...Ch. 11 - You are an accounting student at your local...Ch. 11 - Speedy delivery service recently hired a new...Ch. 11 - Speedy Delivery has a very lazy accountant. When...Ch. 11 - Malone Industries has been in business for five...Ch. 11 - Your family started a new manufacturing business...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
What does the HTTP do?

Accounting Information Systems

Describe the transactions that are recorded in the following equation:

College Accounting (Book Only): A Career Approach

Describe a plant asset.

College Accounting, Chapters 1-27

Define the term product

MKTG 12:STUDENT ED.-TEXT

What are the three steps of controlling?

Foundations of Business (MindTap Course List)

EXPECTED INTEREST RATE The real risk-free rale is 3%. Inflation is expected to be 2% this year and 4% during th...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)