On October 1, Bentley Delivery Services acquired a new truck with a list price (fair market value) of $75,000. Bentley Delivery received a trade-in allowance

On October 1, Bentley Delivery Services acquired a new truck with a list price (fair market value) of $75,000. Bentley Delivery received a trade-in allowance (fair market value) of $24,000 on an old truck of similar type and paid cash of $51,000. The following information about the old truck is obtained from the account in the equipment ledger: cost, $56,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $35,000; annual depreciation, $7,000. Assuming the exchange has commercial substance, journalize the entries to record (a) the current depreciation of the old truck to the date of trade-in and (b) the transaction on October 1.


Answer:











a.

Depreciation Expense—Trucks 5,250
Accumulated Depreciation—Trucks 5,250
Truck depreciation ($7,000 × 9/12).

b.

Accumulated Depreciation—Trucks 40,250
Trucks 75,000
Trucks 56,000
Cash 51,000
Gain on Exchange of Trucks 8,250

The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a three-year period

The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.

2012
Jan. 4. Purchased a used delivery truck for $28,000, paying cash.
Nov. 2. Paid garage $675 for miscellaneous repairs to the truck.
Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck.

2013
Jan. 6. Purchased a new truck for $48,000, paying cash.
Apr. 1. Sold the used truck for $15,000. (Record depreciation to date in 2013 for the truck.)
June 11. Paid garage $450 for miscellaneous repairs to the truck.
Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years.

2014
July 1. Purchased a new truck for $54,000, paying cash.
Oct. 2. Sold the truck purchased January 6, 2013, for $16,750. (Record depreciation to date for 2014 for the truck.)
Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years.



Instructions

Journalize the transactions and the adjusting entries.


Answer:





















































2012
Jan. 4 Delivery Truck 28,000
Cash 28,000
Nov. 2 Truck Repair Expense 675
Cash 675
Dec. 31 Depreciation Expense—Delivery Truck 14,000
Accum. Depreciation—Delivery Truck 14,000
Delivery truck depreciation.
[$28,000 × (1/4 × 2)]
2013
Jan. 6 Delivery Truck 48,000
Cash 48,000
Apr. 1 Depreciation Expense—Delivery Truck 1,750
Accum. Depreciation—Delivery Truck 1,750
Delivery truck depreciation.
[($28,000 – $14,000) × (1/4 × 2) × 3/12]
1 Accum. Depreciation—Delivery Truck 15,750
Cash 15,000
Delivery Truck 28,000
Gain on Sale of Delivery Truck 2,750
June 11 Truck Repair Expense 450
Cash 450
Dec. 31 Depreciation Expense—Delivery Truck 19,200
Accum. Depreciation—Delivery Truck 19,200
Delivery truck depreciation.
[$48,000 × (1/5 × 2)]
2014
July 1 Delivery Truck 54,000
Cash 54,000
Oct. 2 Depreciation Expense—Delivery Truck 8,640
Accum. Depreciation—Delivery Truck 8,640
Delivery truck depreciation.
[($48,000 – $19,200) × (1/5 × 2) × 9/12]
2 Cash 16,750
Accum. Depreciation—Delivery Truck 27,840
Loss on Sale of Delivery Truck 3,410
Delivery Truck 48,000
Dec. 31 Depreciation Expense—Delivery Truck 6,750
Accum. Depreciation—Delivery Truck 6,750
Delivery truck depreciation.
[$54,000 × (1/8 × 2) × 1/2]