The following transactions, adjusting entries, and closing entries were complete
ID: 2486626 • Letter: T
Question
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. 2014 Jan. 4. Purchased a used delivery truck for $26,960, paying cash. Nov. 2. Paid garage $600 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 $5,250 for the truck. 2015 Jan. 6. Purchased a new truck for $50,150, paying cash. Apr. 1. Sold the used truck for $14,400. (Record depreciation to date in 2015 for the truck.) June 11. Paid garage $465 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $8,850 and an estimated life of five years. 2016 July 1. Purchased a new truck for $55,520, paying cash. Oct. 2. Sold the truck purchased January 6, 2015, for $17,473. (Record depreciation to date for 2016 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,565 and an estimated useful life of eight years. Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles. Be sure to include the YEAR in the date for the FIRST transaction on each page.
Explanation / Answer
Particulars Debit Credit Comments 4-Jan-14 Delivery Truck 26960 Useful life 4 years Cash 26960 Residual Value = 5250 (Used delivery truck purchased) Depreciation rate = 25% 2-Nov-14 Repairs 600 Double declining depreciation = 50% Cash 600 (Repairs incurred0 31-Dec-14 Depreciation 13332 40% * 361/365 Delivery Truck 13332 (Depreciation for 361 days booked) 6-Jan-15 Delivery Truck 50150 Cash 50150 (New truck purchased) 1-Apr-15 Cash 14400 WDV = 13628 Gain on sale 2476 Depreciation for 3 months = 1704 Delivery Truck 11924 WDV on April 1 = 11924 (Delivery truck sold) 11-Jun-15 Repairs 465 Cash 465 (Repairs incurred0 31-Dec-15 Depreciation 19730 Useful life 5 years Delivery Truck 19730 Residual Value = 8850 (Depreciation for 359 days booked) Depreciation rate = 20% Double declining depreciation = 40% 1-Jul-16 Delivery Truck 55520 Cash 55520 (New truck purchased) WDV = 30420 2-Oct-16 Cash 17473 Depreciation for 9 months = 9126 Loss on sale 3821 WDV on Oct 1 = 21294 Delivery Truck 21294 31-Dec-16 Depreciation 6940 Useful life 8 years Delivery Truck 6940 Residual Value = 12565 (Depreciation for 6 months booked) Depreciation rate = 12.5% Double declining depreciation = 25%
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