y acquires a truck with cash at a cost of $34,000 on January, 1, 2015. The truck
ID: 2519602 • Letter: Y
Question
y acquires a truck with cash at a cost of $34,000 on January, 1, 2015. The truck has a age value of $4,000 and a useful life of 6 years 37. Kelleyalue S alculate the annual depreciation amount using the straight line deprecation method. calculate the book value of the truck on December 31, 2016 after depreciation for 2016 has been recorded. the useful life will be a total of 7 years (instead of 6) and the salvage value will be $2,000 (instead of 54,000). Assume no depreciation has been recorded yet for 2017 at the time of the revision. (c) Calculate the revised annual depreciation amount on December 31, 2017 if Kelley Company realizes appropriate journal entry to record this transaction assuming all deprecation entries have been recorded at the time of the sale. Note that Kelley records vehicles in its 'Equipment account and uses Gain on Sale' and 'Loss on Sale' accounts when applicable to the sale of plant assets. (d) At the end of the revised 7 year useful life, Kelley Company sells the truck for $1,500. Make theExplanation / Answer
Answer
Working 1
Cost of Truck
$ 34,000.00
(-) salvage Value
$ 4,000.00
Depreciable base
$ 30,000.00
Useful Life [years]
6
Annual SLM depreciation expense
$ 5,000.00
Working 2
Year
Depreciation expense
Ending Book Value
2015
$ 5,000.00
$ 29,000.00
2016
$ 5,000.00
$ 24,000.00
Working 3
Ending book value 2016
$ 24,000.00
(-) New salvage value
$ 2,000.00
New depreciable base
$ 22,000.00
New useful life [years]
7
Years passed [2015 & 2016]
2
Remaining Life
5
New Annual Depreciation from 2017
$ 4,400.00
Working 4
Year
Depreciation expense
Ending Book Value
2015
$ 5,000.00
$ 29,000.00
2016
$ 5,000.00
$ 24,000.00
2017
$ 4,400.00
$ 19,600.00
2018
$ 4,400.00
$ 15,200.00
2019
$ 4,400.00
$ 10,800.00
2020
$ 4,400.00
$ 6,400.00
2021
$ 4,400.00
$ 2,000.00
Total Accumulated Depreciation
$ 32,000.00
Accounts titles
Debit
Credit
Cash [ received on sale]
$ 1,500.00
Accumulated Depreciation-Equipment [working 4]
$ 32,000.00
Loss on Sale [balancing figure]
$ 500.00
Equipment [original cost]
$ 34,000.00
(truck sold at the end of its life)
Working 1
Cost of Truck
$ 34,000.00
(-) salvage Value
$ 4,000.00
Depreciable base
$ 30,000.00
Useful Life [years]
6
Annual SLM depreciation expense
$ 5,000.00
Working 2
Year
Depreciation expense
Ending Book Value
2015
$ 5,000.00
$ 29,000.00
2016
$ 5,000.00
$ 24,000.00
Working 3
Ending book value 2016
$ 24,000.00
(-) New salvage value
$ 2,000.00
New depreciable base
$ 22,000.00
New useful life [years]
7
Years passed [2015 & 2016]
2
Remaining Life
5
New Annual Depreciation from 2017
$ 4,400.00
Working 4
Year
Depreciation expense
Ending Book Value
2015
$ 5,000.00
$ 29,000.00
2016
$ 5,000.00
$ 24,000.00
2017
$ 4,400.00
$ 19,600.00
2018
$ 4,400.00
$ 15,200.00
2019
$ 4,400.00
$ 10,800.00
2020
$ 4,400.00
$ 6,400.00
2021
$ 4,400.00
$ 2,000.00
Total Accumulated Depreciation
$ 32,000.00
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