During a three year period, abrams electric completed the following transactions
ID: 2446475 • Letter: D
Question
During a three year period, abrams electric completed the following transactions related to its service truck:
Year 1:
Jan 4- bought a used service truck for cash, 18,600
Nov 21- paid garage for maintenance for repairs to the truck, 146
Dec 31- recorded the adjusting entry for depreciation for the fiscal year. The estimated life of the truck is four years, and it has an estimated salvage value of 3,800. Abrams uses the straight line method of depreciation.
Dec 31- closed the expense accounts to the income summary account
Year 2:
Apr 2- paid garage for tune up of truck, 86
May 24- bought tires for the truck, 335
Dec 31- recorded the adjusting entry for depreciation for the fiscal year. 31 closed the expense accounts to the income summary account
Dec 31- closed the expense accounts to the income summary account
Year 3:
June 6- paid garage for maintenance repairs to truck, 362
June 27- traded in the used truck for a new truck that cost 22,800 , receiving a trade in allowance of 7,500 and paying the difference in cash. Recorded the entry to depreciate the truck up to the present date. Made the entry to record the exchange, assuming that the exchange has “commercial substance”.
Dec 31- recorded the adjusting entry for depreciation of the new truck for the fiscal year. The estimated life of truck is 6 years, and it has an estimated trade in value of $2,600. Abrams electric used the straight line method of depreciation.
Dec 31- closed the expense accounts to the income summary account
1.Record the transactions in general journal form
2.After journalizing each entry, post to the following ledger accounts: truck, no 131; accumulated depreciation, truck no, 132; truck repair expense, no 519; depreciation expense, truck, no 523; and loss on disposal of property and equipment, no 640.
Explanation / Answer
SOLUTION :
Jounal entry :
DATE
PARTICULARS
DEBIT
CREDIT
YEAR 1
JAN 4.
TRUCK
18,600.00
CASH
18,600.00
NOV 21.
TRUCK REPAIRS EXPENSE
146.00
CASH
146.00
DEC 31.
DEPRECIATION
3,669.59
ACCUMULATED DEPRECIATION
3,669.59
DEC 31.
INCOME SUMMARY ACCOUNT
3,815.59
DEPRECIATION
3,669.59
TRUCK REPAIRS EXPENSE
146.00
YEAR 2
APR 2.
TRUCK REPAIRS EXPENSE
86.00
CASH
86.00
MAY 24.
TRUCK REPAIRS EXPENSE
335.00
CASH
335.00
DEC 31.
DEPRECIATION
3,700.00
ACCUMULATED DEPRECIATION
3,700.00
DEC 31.
INCOME SUMMARY ACCOUNT
4,121.00
DEPRECIATION
3,700.00
TRUCK REPAIRS EXPENSE
421.00
YEAR 3
JUNE 6.
TRUCK REPAIRS EXPENSE
362.00
CASH
362.00
JUNE 27.
TRUCK
22,800.00
TRUCK - OLD
7,500.00
CASH
15,300.00
JUNE 27.
DEPRECIATION
1,804.38
ACCUMULATED DEPRECIATION
1,804.38
(ON OLD TRUCK)
JUNE 27.
LOSS ON SALE OF TRUCK
1,926.03
TRUCK
1,926.03
JUNE 27.
ACCUMULATED DEPRECIATION
9,173.97
TO TRUCK
9,173.97
DEC 31.
DEPRECIATION
1,734.06
ACCUMULATED DEPRECIATION
1,734.06
DEC 31.
INCOME SUMMARY ACCOUNT
DEPRECIATION
3,538.45
TRUCK REPAIRS EXPENSE
362.00
LOSS ON SALE OF TRUCK (OLD)
1,926.03
WORKING FOR DEPRECIATION
COST OF USED TRUCK
18,600.00
USEFUL LIFE
4
SALVAGE
3,800.00
DEPRECIATION P.A (COST - SALVAGE)/USEFUL LIFE
3,700.00
DEPRECIATION FOR 362 DAYS IN YEAR 1
3,669.59
(FROM JAN 4 TO DEC 31)
DEPRECIATION FOR YEAR 2 FOR ENTIRE YEAR
3,700.00
DEPRECIATION FOR 178 DAYS IN YEAR 3
1,804.38
COST OF NEW TRUCK
22800
SALVAGE
2600
20200
USEFUL LIFE
6
DEPRECIATION P.A
3,366.67
DEPRECIATION IN YEAR OF PURCHASE FOR 188 DAYS
1,734.06
(FROM JUN 27 TO DEC 31)
WORKING FOR LOSS ON SALE OF TRUCK :
LOSS ON SALE OF OLD TRUCK
COST
18,600.00
ACCUMULATED DEPRECIATION TILL JUN 27 (SALE DATE)
9,173.97
WDV
9,426.03
EXCHANGE PRICE
7,500.00
LOSS ON SALE OF OLD TRUCK
1,926.03
Ledgers :
Debit
TRUCK
Credit
DATE
PARTICULARS
$
DATE
PARTICULARS
$
Year 1
JAN 4.
CASH
18,600.00
DEC 31.
CLOSING BALANCE
18,600.00
18,600.00
18,600.00
Year 2
JAN. 1
OPENING BALANCE
18,600.00
DEC 31.
CLOSING BALANCE
18,600.00
18,600.00
18,600.00
Year 3
JAN. 1
OPENING BALANCE
18,600.00
JUNE 27.
ACCUMULATED DEPRECIATION
9,173.97
JUNE 27.
CASH
15,300.00
JUNE 27.
loss on disposal of property and equipment
1,926.03
DEC 31.
CLOSING BALANCE
22,800.00
33,900.00
33,900.00
ACCUMULATED DEPRECIATION
DATE
PARTICULARS
$
DATE
PARTICULARS
$
Year 1
DEC 31.
CLOSING BALANCE
3,669.59
DEC 31.
DEPRECIATION
3,669.59
3,669.59
3,669.59
Year 2
DEC 31.
CLOSING BALANCE
7,369.59
JAN 1.
OPENING BALANCE
3,669.59
DEC 31.
DEPRECIATION
3,700.00
7,369.59
7,369.59
Year 3
JUNE 27.
TRUCK
9,173.97
JAN 1.
OPENING BALANCE
7,369.59
DEC 31.
CLOSING BALANCE
1,734.06
JUNE 27.
DEPRECIATION
1,804.38
DEC 31.
DEPRECIATION
1,734.06
10,908.04
10,908.04
TRUK REPAIR EXP
DATE
PARTICULARS
$
DATE
PARTICULARS
$
Year 1
NOV 21.
CASH
146.00
DEC 31.
INCOME SUMMARY ACCOUNT
146.00
146.00
146.00
Year 2
APR 2.
CASH
86.00
DEC 31.
INCOME SUMMARY ACCOUNT
421.00
MAY 24.
CASH
335.00
421.00
421.00
Year 3
JUNE 6.
CASH
362.00
DEC 31.
INCOME SUMMARY ACCOUNT
362.00
362.00
362.00
DEPRECIATION EXP
DATE
PARTICULARS
$
DATE
PARTICULARS
$
Year 1
DEC 31.
ACCUMULATED DEPRECIATION
3,669.59
DEC 31.
INCOME SUMMARY ACCOUNT
3,669.59
3,669.59
3,669.59
Year 2
DEC 31.
ACCUMULATED DEPRECIATION
3,700.00
DEC 31.
INCOME SUMMARY ACCOUNT
3,700.00
3,700.00
3,700.00
Year 3
JUNE 27.
ACCUMULATED DEPRECIATION
1,804.38
DEC 31.
INCOME SUMMARY ACCOUNT
3,538.45
DEC 31.
ACCUMULATED DEPRECIATION
1,734.06
3,538.45
3,538.45
loss on disposal of property and equipment
DATE
PARTICULARS
$
DATE
PARTICULARS
$
Year 3
JUNE 27.
TRUCK
1,926.03
JUNE 27.
INCOME SUMMARY ACCOUNT
1,926.03
1,926.03
1,926.03
DATE
PARTICULARS
DEBIT
CREDIT
YEAR 1
JAN 4.
TRUCK
18,600.00
CASH
18,600.00
NOV 21.
TRUCK REPAIRS EXPENSE
146.00
CASH
146.00
DEC 31.
DEPRECIATION
3,669.59
ACCUMULATED DEPRECIATION
3,669.59
DEC 31.
INCOME SUMMARY ACCOUNT
3,815.59
DEPRECIATION
3,669.59
TRUCK REPAIRS EXPENSE
146.00
YEAR 2
APR 2.
TRUCK REPAIRS EXPENSE
86.00
CASH
86.00
MAY 24.
TRUCK REPAIRS EXPENSE
335.00
CASH
335.00
DEC 31.
DEPRECIATION
3,700.00
ACCUMULATED DEPRECIATION
3,700.00
DEC 31.
INCOME SUMMARY ACCOUNT
4,121.00
DEPRECIATION
3,700.00
TRUCK REPAIRS EXPENSE
421.00
YEAR 3
JUNE 6.
TRUCK REPAIRS EXPENSE
362.00
CASH
362.00
JUNE 27.
TRUCK
22,800.00
TRUCK - OLD
7,500.00
CASH
15,300.00
JUNE 27.
DEPRECIATION
1,804.38
ACCUMULATED DEPRECIATION
1,804.38
(ON OLD TRUCK)
JUNE 27.
LOSS ON SALE OF TRUCK
1,926.03
TRUCK
1,926.03
JUNE 27.
ACCUMULATED DEPRECIATION
9,173.97
TO TRUCK
9,173.97
DEC 31.
DEPRECIATION
1,734.06
ACCUMULATED DEPRECIATION
1,734.06
DEC 31.
INCOME SUMMARY ACCOUNT
DEPRECIATION
3,538.45
TRUCK REPAIRS EXPENSE
362.00
LOSS ON SALE OF TRUCK (OLD)
1,926.03
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