The following transactions and adjusting entries were completed by Legacy Furnit

Question

The following transactions and adjusting 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.

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Journalize the Year 2 transactions and adjusting entries on Page 2.

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Journalize the Year 3 transactions and adjusting entries on Page 3.

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Year 1 Jan. 4. Purchased a used delivery truck for $28,000, paying cash. Nov. 2. Paid garage $675 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 $5,000 for the truck. Year 2 Jan. 6. Purchased a new truck for $48,000, paying cash. Apr. 1. Sold the used truck for $15,000. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $450 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. Year 3 July 1. Purchased a new truck for $54,000, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $16,750. (Record depreciation to date for Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years.

Explanation / Answer

Working:

LEGACY FURNITURE COMPANY General journal for Year 1 Date Account title Post Ref Debit Credit Asset = Liability + Equity Jan.4 Delivery Truck 123 28000 28000 Cash 110 28000 -28000 (To record purchase of used truck) Nov.2 Truck Repair Expense 525 525 Cash 110 525 -525 -525 (To record repair expense for the truck) Dec.31 Depreciation expense - Delivery Truck 522 14000 -14000 Accumulated Depreciation - Delivery Truck 124 14000 -14000 (To record depreciation expense for the truck - DDB method ) LEGACY FURNITURE COMPANY General journal for Year 2 Date Account title Post Ref Debit Credit Asset = Liability + Equity Jan.6 Delivery Truck 123 48000 48000 Cash 110 48000 -48000 (To record return of goods to Taaco. Co.) Apr.1 Depreciation expense - Delivery Truck 522 1750 -1750 Accumulated Depreciation - Delivery Truck 124 1750 -1750 (To record depreciation on the used delivery truck) Apr.1 Cash 110 15000 15000 Accumulated Depreciation - Delivery Truck 124 15750 15750 Delivery Truck 123 28000 -28000 Gain on sale of delivery truck 620 2750 2750 (To record sale of used truck) Jun.11 Truck Repair Expense 110 450 -450 Cash 450 -450 (To record payment for misc. Repair expense) Dec.31 Depreciation expense - Delivery Truck 19200 -19200 Accumulated Depreciation - Delivery Truck 19200 -19200 (To record depreciation expense for the truck - DDB method ) LEGACY FURNITURE COMPANY General journal for Year 3 Date Account title Post Ref Debit Credit Asset = Liability + Equity July.1 Delivery Truck 123 54000 48000 Cash 110 54000 -48000 (To record return of goods to Taaco. Co.) Oct.2 Depreciation expense - Delivery Truck 522 8640 -8640 Accumulated Depreciation - Delivery Truck 124 8640 -8640 (To record depreciation on the used delivery truck) Oct.2 Cash 110 16750 16750 Accumulated Depreciation - Delivery Truck 124 27840 27840 Loss on sale of truck 720 3410 -3410 Delivery Truck 123 48000 -48000 (To record sale of used truck) Dec.31 Depreciation expense - Delivery Truck 6750 -6750 Accumulated Depreciation - Delivery Truck 6750 -6750 (To record depreciation expense for the truck - DDB method )

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