Textbook Problem

Loban Company purchased four cars for $9,000 each and expects that they will be sold in 3 years for $1,500 each. The company uses group depreciation on a straight-line basis.

Required:

1. 1. Prepare journal entries to record the acquisition and the first year’s depreciation expense.
2. 2. If one of the cars is sold at the beginning of the second year for $7,000, what journal entry is required?