Chen Company completed the following transactions and events involving its deliv
ID: 2419863 • Letter: C
Question
Chen Company completed the following transactions and events involving its delivery trucks.
2010
Jan.
1
Paid $22,015 cash plus $1,635 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec.
31
Recorded annual straight-line depreciation on the truck.
2011
Dec.
31
Due to new information obtained earlier in the year, the truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,700. Recorded annual straight-line depreciation on the truck.
2012
Dec.
31
Recorded annual straight-line depreciation on the truck.
Dec.
31
Sold the truck for $5,500 cash.
Required:
Prepare journal entries to record these transactions and events in the given order. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Date
General Journal
Debit
Credit
Chen Company completed the following transactions and events involving its delivery trucks.
Explanation / Answer
Journal Entries:
Date
General Journal
Debit
Credit
Jan 1 2010
Truck a/c (22015 + 1635) Dr
To Cash a/c
[Truck Purchased on payment]
23650
23650
Dec 31 2010
Depreciation a/c ((23650 - 2150) / 5) Dr
To Truck a/c
[Depreciation recorded for the first year]
4300
4300
Dec 31 2011
Depreciation a/c Dr
To Truck a/c
[Depreciation recorded for the Second year]
5550
5550
Dec 31 2012
Depreciation a/c Dr
To Truck a/c
[Depreciation recorded for the Third year]
5550
5550
Cash a/c Dr
Loss on Sale of Truck a/c Dr
To Truck a/c
[Sale of Truck for $5500]
5500
2750
8250
Truck Value as on Jan 1 2010 = Purchase Price + Sales Tax = 22015 + 1635 = $23650
Depreciation for the first year:
Depreciable Value = (Truck Value – Salvage Value) / Estimated Life
= (23650 - 2150) / 5
= 21500 / 5
= $4300
Depreciation for the Second Year:
Remaining Useful Life = Revised Useful Life – Expired Life
= 4-1 = 3 years
Book Value at the end of first year = Truck Value – Depreciation
= 23650 – 4300
= $19350
Revised Depreciable Value = Book Value at the end of first year – New Salvage Value
= 19350 – 2700
= 16650
Depreciation from the Second year
= Depreciable Value / Remaining useful life
= 16650 / 3
= 5550
Book Value at the end of third year
= Truck Value – Depreciation for the three years
= 23650 – (4300 + 5550 + 5550)
= 23650 – 15400
= 8250
Sale Value = 5500
Loss on Sale of Asset = 8250 – 5500 = 2750
Date
General Journal
Debit
Credit
Jan 1 2010
Truck a/c (22015 + 1635) Dr
To Cash a/c
[Truck Purchased on payment]
23650
23650
Dec 31 2010
Depreciation a/c ((23650 - 2150) / 5) Dr
To Truck a/c
[Depreciation recorded for the first year]
4300
4300
Dec 31 2011
Depreciation a/c Dr
To Truck a/c
[Depreciation recorded for the Second year]
5550
5550
Dec 31 2012
Depreciation a/c Dr
To Truck a/c
[Depreciation recorded for the Third year]
5550
5550
Cash a/c Dr
Loss on Sale of Truck a/c Dr
To Truck a/c
[Sale of Truck for $5500]
5500
2750
8250
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