The following transactions and adjusting entries were completed by Legacy Furnit
ID: 2564775 • Letter: T
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. Year 1 Jan. 4. Purchased a used delivery truck for $28,400, paying cash. Nov. 2. Paid garage $710 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 $4,835 for the truck. Year 2 Jan. 6. Purchased a new truck for $46,800, paying cash. Apr. 1. Sold the used truck for $15,145. (Record depreciation to date in Year 2 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 $8,560 and an estimated life of five years. Year 3 July 1. Purchased a new truck for $52,960, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $16,356. (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 $12,375 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.
CHART OF ACCOUNTS Legacy Furniture Co. General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 115 Notes Receivable 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Delivery Truck 124 Accumulated Depreciation-Delivery Truck 125 Equipment 126 Accumulated Depreciation-Equipment 130 Mineral Rights 131 Accumulated Depletion 132 Goodwill 133 Patents LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary REVENUE 410 Sales 610 Interest Revenue 620 Gain on Sale of Delivery Truck 621 Gain on Sale of Equipment EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Delivery Truck 523 Delivery Expense 525 Truck Repair Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Equipment 533 Depletion Expense 534 Amortization Expense-Patents 535 Insurance Expense 536 Supplies Expense 539 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of Delivery Truck 721 Loss on Sale of Equipment Instructions ear Jan. 4 Nov. 2 Dec. 31. Purchased a used delivery truck for $28,400, paying cash Paid garage $710 for miscellaneous repairs to the truck Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $4,835 for the truck. Year 2 Jan. 6 Apr. 1. June 11. Dec. 31. Purchased a new truck for $46,800, paying cash Sold the used truck for $15,145. (Record depreciation to date in Year 2 for the truck.) Paid garage $465 for miscellaneous repairs to the truck Record depreciation for the new truck. It has an estimated residual value of $8,560 and an estimated life of five years Year 3 Purchased a new truck for $52,960, paying cash Sold the truck purchased January 6, Year 2, for $16,356. (Record depreciation to date for Year 3 for the truck.) Recorded depreciation on the remaining truck. It has an estimated residual value of $12,375 and an estimated useful life of eight years Lul Oct. 2. Dec. 31.Explanation / Answer
Date Description Debit Credit Year 1 Jan. 4 Delivery Truck 28,400 Cash 28,400 Nov. 2 Truck Repair Expense 710 Cash 710 Dec. 31 Depreciation Expense—Delivery Truck 14,200 Adj entry Accum. Depreciation—Delivery Truck 14,200 Delivery truck depreciation. [$28,400 × (1/4 × 2)] Year 2 Jan. 6 Delivery Truck 46,800 Cash 46,800 Apr. 1 Depreciation Expense—Delivery Truck 1,775 Accum. Depreciation—Delivery Truck 1,775 Delivery truck depreciation. [($28,400 – $14,200) × (1/4 × 2) × 3/12] 1 Accum. Depreciation—Delivery Truck 15,975 Cash 15,145 Delivery Truck 28,200 Gain on Sale of Delivery Truck 2,920 June 11 Truck Repair Expense 465 Cash 465 Dec. 31 Depreciation Expense—Delivery Truck 18,720 Adj entry Accum. Depreciation—Delivery Truck 18,720 Delivery truck depreciation. [$46,800 × (1/5 × 2)] Year 3 July 1 Delivery Truck 52,960 Cash 52,960 Oct. 2 Depreciation Expense—Delivery Truck 8,424 Accum. Depreciation—Delivery Truck 8,424 Delivery truck depreciation. [($46,800 – $18,720) × (1/5 × 2) × 9/12] 2 Cash 16,356 Accum. Depreciation—Delivery Truck 27,144 Loss on Sale of Delivery Truck 3,300 Delivery Truck 46,800 Dec. 31 Depreciation Expense—Delivery Truck 6,620 adj entry Accum. Depreciation—Delivery Truck 6,620 Delivery truck depreciation. [$52,960 × (1/8 × 2) × 1/2]
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