Yoshi Company completed the following transactions and event

Yoshi Company completed the following transactions and events involving its delivery trucks.

2016

2017

2018

Required:

1-a. Calculate depreciation for year 2017.
1-b. Calculate book value and gain (loss) for sale of Truck on December, 2018.
1-c. Prepare journal entries to record these transactions and events.

Calculate depreciation for year 2017.

Calculate book value and gain (loss) for sale of Truck on December, 2018.

1

Record the total cost of the new delivery truck.

2

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

3

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

4

Record the year-end adjusting entry for the depreciation expense of the delivery truck.

5

Record the sale of the delivery truck for $5,600 cash.

Jan.		1		Paid $23,515 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year life and a $2,300 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec.		31		Recorded annual straight-line depreciation on the truck.

Solution

Straight line depreciation = (cost - salvage value)/estimated useful life                                                 total cost of Truck cash paid 23,515 Sales tax 1,485 total cost of Truck 25,000 Depreciation for year 2016 = (25,000-2,300)/5 4540 Depreciation for year 2017    Book value at beginning of the year (25000-4540)= 20460 Salvage value -2,550 17910 Remaining useful life (4 years - 1 year) 3 Depreciation expense 5970 1-a) total cost 25,000 lessAccumulated depreciation (from 2016) 4,540 book value 20,460 less revised salvage value 2,550 remaining cost to be depreciated 17,910 years of life remaining 3 total depreciation for 2017 5,970 1-b) Depreciation expense (for 2016) 4,540 Depreciation expense (for 2017) 5,970 Depreciation expense (for 2018) 5,970 Accumulated depreciation 12/31/2018 16,480 Book value of truck at 12/31/2018 total cost 25,000 Accumulated depreciation 12/31/2018 16,480 Book value of truck at 12/31/2018 8,520 Book value of truck at 12/31/2018 8,520 Cash received from sale of truck 5,600 loss on sale of truck 2,920 1-c Journal Entries Date Accounting titles & Explanations Debit Credit 1/1/2016 Truck 25,000 cash 25,000 12/31/2016 Depreciation expense 4,540 Accumulated Depreciation 4,540 12/31/2017 Depreciation expense 5,970 Accumulated Depreciation 5,970 12/31/2018 Depreciation expense 5,970 Accumulated Depreciation 5,970 12/31/2018 cash 5,600 Accumulated depreciation 16,480 Loss on disposal 2,920 Truck 25,000