On July 1, 2013, Farm Fresh Industries purchased a specialized delivery truck fo

Question

On July 1, 2013, Farm Fresh Industries purchased a specialized delivery truck for $310,000. At the time, Farm Fresh estimated the truck to have a useful life of eight years and a residual value of $22,000. On March 1, 2018, the truck was sold for $130,000. Farm Fresh uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service.

Required:
1. Prepare the journal entry to update depreciation in 2018.
2. Prepare the journal entry to record the sale of the truck.
3. Assuming that the truck was sold for $157,000, prepare the journal entry to record the sale.

Explanation / Answer

1 Mar-1-18 Depreciation expense 6000 =(310000-22000)/8/12*2       Accumulated depreciation 6000 2 Accumulated depreciation till date: 2013 18000 2014-2017 144000 2018 6000 Total 168000 Mar-1-18 Cash 130000 Accumulated depreciation 168000 Loss on sale of truck 12000         Truck 310000 3 Mar-1-18 Cash 157000 Accumulated depreciation 168000         Truck 310000         Gain on sale of truck 15000

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