Company A purchased a vehicle costing $25,000, useful life of 5 years, and no re

Question

Company A purchased a vehicle costing $25,000, useful life of 5 years, and no residual value. How much depreciation expense will be recorded at the end of 2013? What is the net book value at the end of 2015? How much depreciation expense will be recorded at the end of 2016? What is the net book value on 01/01/17? If they sell the truck for its residual value in cash on 04/01/18, what is the jo to record the sale? What if they receive $4,000 in cash upon sale? What if they receive $2,000 in cash upon sale?

Explanation / Answer

SLM Date of purchase March 31 2013 Cost of vehicle 25000 useful life 5 years Depriciation pa 5000 (25000/5) a) depriciation for the year 2013 is for 9 months depriciation = 5000 /12*9 = 3750 b) depriciation 2013 3750 9 months depriciation 2014 5000 1 year depriciation 2015 5000 1 year depriciation 2016 5000 1year Total depriciation 18750 Net Book value on 1/1/17 = 25000 - 18750 = 6250 Asset sold on 4/1/18 depriciation 2013 3750 9 months depriciation 2014 5000 1 year depriciation 2015 5000 1 year depriciation 2016 5000 1year depriciation 2017 5000 1year Total depriciation 23750 Net Book value on 1/1/17 = 25000 - 23750 = 1250 JE Cash Dr 1250 Accumulated depriciation Dr 23750             equipment Cr 25000 1) 4000 received in cash on sale Cash Dr 4000 Accumulated depriciation Dr 23750             equipment Cr 25000              gain on sale of equipment Cr 2750 2) 2000 received in cash on sale Cash Dr 2000 Accumulated depriciation Dr 23750             equipment Cr 25000              gain on sale of equipment Cr 750

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