Transactions for Fixed Assets, Including Sale The following transactions, adjust
ID: 2370720 • Letter: T
Question
Transactions for Fixed Assets, Including Sale
The following transactions, adjusting entries, and closing entries were completed by King 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.
2010
Jan. 4.
Purchased a used delivery truck for $61,440, paying cash.
Feb. 24.
Paid garage $220 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
Dec. 31.
Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is 8 years, with a residual value of $12,900 for the truck.
2011
Jan. 3.
Purchased a new truck for $70,560, paying cash.
Mar. 7.
Paid garage $330 to tune the engine and make other minor repairs on the used truck.
Apr. 30.
Sold the used truck for $40,440. (Record depreciation to date in 2011 for the truck.)
Dec. 31.
Record depreciation for the new truck. It has an estimated trade-in value of $12,700 and an estimated life of 7 years.
2012
July 1.
Purchased a new truck for $81,000, paying cash.
Oct. 7.
Sold the truck purchased January 3, 2011, for $41,700. (Record depreciation for the year.)
Dec. 31.
Recorded depreciation on the remaining truck. It has an estimated residual value of $14,600 and an estimated useful life of 10 years.
Instructions:
Journalize the transaction and the adjusting entries.
2010
Jan. 4.
Purchased a used delivery truck for $61,440, paying cash.
Feb. 24.
Paid garage $220 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
Dec. 31.
Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is 8 years, with a residual value of $12,900 for the truck.
2011
Jan. 3.
Purchased a new truck for $70,560, paying cash.
Mar. 7.
Paid garage $330 to tune the engine and make other minor repairs on the used truck.
Apr. 30.
Sold the used truck for $40,440. (Record depreciation to date in 2011 for the truck.)
Dec. 31.
Record depreciation for the new truck. It has an estimated trade-in value of $12,700 and an estimated life of 7 years.
2012
July 1.
Purchased a new truck for $81,000, paying cash.
Oct. 7.
Sold the truck purchased January 3, 2011, for $41,700. (Record depreciation for the year.)
Dec. 31.
Recorded depreciation on the remaining truck. It has an estimated residual value of $14,600 and an estimated useful life of 10 years.
Explanation / Answer
jan 4
Dr delivary truck 61440
Cr cash 61440
feb 24
Dr repair 220
Cr cash 220
dec 31
dr amortization expense 15360
Cr accumulated amortization 15360
61440 * 0.25
double declining rate 200%/8 = 0.25
year 2011
jan3
Dr new truck 70560
Cr cah 70560
mar 7
Dr repairing expense 330
Cr cash 330
apr 30
Dr cash 40440
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