question archive Acquisition, Depreciation, and sale of an Asset On July 1, 2017, Philip Ward bought a used pickup truck at a cost of $5,300 for use in his business On the same day, Ward had the truck painted blue and white (his company's colors) at a cost of Ward estimates the life of the truck to be three years or 40,000 miles
Acquisition, Depreciation, and sale of an Asset On July 1, 2017, Philip Ward bought a used pickup truck at a cost of $5,300 for use in his business On the same day, Ward had the truck painted blue and white (his company's colors) at a cost of Ward estimates the life of the truck to be three years or 40,000 miles
Subject:AccountingPrice:2.84 Bought3
Acquisition, Depreciation, and sale of an Asset On July 1, 2017, Philip Ward bought a used pickup truck at a cost of $5,300 for use in his business On the same day, Ward had the truck painted blue and white (his company's colors) at a cost of Ward estimates the life of the truck to be three years or 40,000 miles. He further estimates that the truck will have a $450 scrap value at the end of its life, but that it will also cost him $50 to transfer the truck to the junkyard. Required: 1. Record the following Journal entries: a. July 1, 2017: Paid all bills pertaining to the truck. (No previous entries have been recorded concerning these bills.) b. December 31, 2017. The depreciation expense for the year, using the straight-line method. c. December 31, 2018: The depreciation expense for 2018, again using the straight-line method. d. January 2, 2019: Sold the truck for $2,600 cash. 2. What would the depreciation expense for 2017 have been if the truck had been driven 8,000 miles and the units-of-production method of depreciation had been used? 3. Interpretive Question: In part (1d), there is a loss of 650. Why did this loss occur?
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| ('1) | Journal entries | ||
| Date | Particulars | Debit | Credit |
| 01-Jul-17 | Truck Dr. | 6100 | |
| To Bank | 6100 | ||
| (Being Truck Purchased) | |||
| 31-Dec-17 | Depreciation Dr. | 950 | |
| To Accumulated depreciation | 950 | ||
| (6100-400)/3*6/12 | |||
| (being Depreciation Recorded) | |||
| 31-Dec-18 | Depreciation Dr. | 1900 | |
| To Accumulated depreciation | 1900 | ||
| (6100-400)/3 | |||
| (being Depreciation Recorded) | |||
| 02-Jan-19 | Bank Dr | 2600 | |
| Accumulated depreciation Dr. | 2850 | ||
| Loss on sale of Truck dr. | 650 | ||
| To Truck | 6100 |
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| ('2) | |
| Cost of Truck | 6100 |
| Residual value | 400 |
| Total Miles | 40000 |
| Miles in 2017 | 8000 |
| Deprecation in 2017 | 1140 |
3. There is loss of 650 as the book value of truck was 3250 which was sold for 2600. It is not fully used and sold at lower value.
