Borrell Company purchased four delivery trucks on January 2, 2019, for $22,000 each. Borrell expected two of the trucks to last 5 years and have a residual value of $3,500 each. The other two trucks had an expected life of 8 years and no residual value. Borrell uses straight-line depreciation on a composite basis.
Required:
Prepare journal entries to record the following events:
1.
Prepare journal entries for the given transaction on January 1, 2021.
Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolesces.
Straight-line depreciation method: The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset is referred to as straight-line method.
Prepare journal entries for the truck disposed on January 1, 2021:
Date | Account Title & Explanation | Debit ($) | Credit($) |
January 1, 2021 | Cash | 400 | |
 | Accumulated depreciation-Trucks (1) | 21,600 | |
 |     Trucks | 22,000 | |
 | (To record the disposal of truck) |
Table (1)
2.
Prepare journal entry for the purchase of truck.
3.
Prepare journal entries for the depreciation expense of Company B for the year 2021.
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