can I get the solution for c,d,and e A truck was purchased on 1/01/11 for $ 32,0
ID: 2466530 • Letter: C
Question
can I get the solution for c,d,and e
A truck was purchased on 1/01/11 for $ 32,000 Additionally, $ 1, 000 was paid for painting the company name on the side of the truck and $ 3,000 for a special protective beeline to enable the truck to be used to deliver fragile Big Red statues to the customers. $ 700 was paid for annual licensing and $ 1, 200 for a one - year insurance policy. List and total the expenditures that would go into the assed account, Truck (or Equipment) and be deprecated. Make the journal entry for the acquisition (purchase) of the truck on 1/01/11. Which expenditure would be expensed immediately (deviled into expense account) upon spending the money? Which expenditure would be put into a current asset account? The truck is determined to have an estimated 6 - year useful life and an estimated salvage value of $ 2.000. Write the journal entry made on 12/31/11. 12/31/12, 12/31/13 and 12/31/14. Write only one of the identical 4 Journal entries for the yearly depreciation expense. What depreciation method must you be using given that the entries are IDENTICAL for each full/year? What is the book value of the equipment at 12/31? Show the work (break - down) The truck is sold on/for $,.Show the journal entry for SIX months of depreciation for 2015. Make the journal entry for the actual sale of the equipment on 7/01/15 for $9,000 cash Accumulate Depreciate will include depreciation for 2011, 2012, 2013, 2014 and the six months of 2015Explanation / Answer
a)
1)
Historical cost is the usual basis for valuing property, plant, and equipment. Historical cost is measured by the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. The purchase price, freight costs, sales taxes, and installation costs of a productive asset are considered part of the asset’s cost. These costs are allocated to future periods through depreciation. Any related costs incurred after the asset’s acquisition, such as additions, improvements, or replacements, are added to the asset’s cost if they provide future service potential. Otherwise they are expensed immediately.
In this case,
The painting of the name of the company on the truck, the annual insurance premium as well as annual license fee are all revenue expenditures as non of them have incurred to bring the truck in the condition of its productive use.
Therefore the cost of the truck = $32000
2)
Truck .........................................Dr...$32000
Cash..............................................................Cr. $32000
3)
The painting expense of $1000 will be expenses immediately when incurred.
4)
The annual license fees and the annual insurance fee will be kept in the current assets account till the expiry of one year.
b)
Under straight line method, depreciation will remain same in each of the 6 years of the useful life of the asset.
Straight line depreciation per year
= (cost of the asset – salvage value) / useful life of the asset
= ($32000 - $2000) / 6 years
= $30000 / 6 years
= $5000 per year.
Journal entry to be passed on Dec 31, every year is:
Depreciation................................................Dr. $5000
Accumulated Depreciation.............................................Cr. $5000
c)
Accumulated depreciation at the end of the 4th year = 4 x $5000 = $20000
Book Value of the machine on 12/31/14 = cost of the asset – accumulated depreciation = $32000 - $20000 = $12000
d)
Depreciation for 6 moths = $5000 / 2 = $2500
Journal for 6 months depreciation:
Depreciation................................................Dr. $2500
Accumulated Depreciation.............................................Cr. $2500
e)
Accumulated depreciation on the date of sale = $20000 + $2500 = $22500
Book Value on the date of sale = $32000 - $22500 = $9500
Profit on sale = $15000 - $9500 = $5500
Journal entry:
Cash..................................................................Dr. $15000
Accumulated depreciation...............................Dr. $22500
Profit on sale of truck.............................................................Cr. $5500
Truck......................................................................................Cr. $32000
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