Taggert Railroad purchased a new coal car on the first day of Year 1. The follow

Question

Taggert Railroad purchased a new coal car on the first day of Year 1. The following applies to the purchase:

                        Purchase Price                      $700,000

                        Delivery Charge                         50,000

Installation                                  80,000

Salvage Value                                       100,000

Useful Life                              10 years

Prepare the journal entry for the purchase assuming that it was paid for in cash

Prepare the journal entry to record depreciation expense for the year ended December 31, Year 1 using the double-declining-balance method

Prepare the journal entry to record depreciation expense for the year ended December 31, Year 1 using the straight-line method

If the coal car was being depreciated using the double-declining method and was sold on the first day of Year 3 for $550,000 prepare the journal entry to record the sale

If the coal car was being depreciated using the straight-line method and was sold on the first day of     Year 3 for $550,000 prepare the journal entry to record the sale

Explanation / Answer

Journal entry for the purchase assuming that it was paid for in cash Particulars Debit Credit Coal Car a/c $830,000 To Cash a/c $830,000 Note: Value of Car would include Delivery Charges and Installation Exps as they are nessecary to make car use. Journal entry to record depreciation expense for the year ended December 31, Year 1 using the double-declining-balance method Particulars Debit Credit Depreciation a/c $146,000 Coal car a/c $146,000 Journal entry to record depreciation expense for the year ended December 31, Year 1 using the straight-line method Particulars Debit Credit Depreciation a/c $73,000 Coal car a/c $73,000 coal car was being depreciated using the double-declining method and was sold on the first day of Year 3 for $550,000 prepare the journal entry to record the sale Particulars Debit Credit Cash a/c $550,000 Coal Car a/c $538,000 Profit & Loss a/c $12,000 coal car was being depreciated using the straight-line method and was sold on the first day of     Year 3 for $550,000 prepare the journal entry to record the sale Particulars Debit Credit Cash a/c $550,000 Profit & Loss a/c $134,000 Coal Car a/c $684,000

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