Exercise 8-9A Events related to the acquisition, use, and disposal of a tangible

Question

Exercise 8-9A Events related to the acquisition, use, and disposal of a tangible plant asset: straight-line depreciation LO 8-2, 8-5 City Taxi Service purchased a new auto to use as a taxi on January 1, 2016, for $22,600. In addition, City paid sales tax and title fees of $1,190 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $5,720. Required a. Using the straight-line method, compute the depreciation expense for 2016 and 2017. (Round your answers to the nearest whole dollar amount.) 2016 2017 Depreciation expense b. Prepare the general journal entry to record the 2016 depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

SOLUTION

(A) Total cost of Taxi = $$22,600 + $1,190 = $23,790

Depreciation expense for 2016 = (Cost - Salvage value ) / Estimated useful life

= ($23,790 - $5,720) / 5 = $3,614

Depreciation expense for 2017 = $3,614

(B) Journal Entry-

(C) Book value as on 1/1/2018

= $23,790 - $3,614 - $3,614 = $16,562

Date Account titles and Explanation Debit ($) Credit ($) 2016 Depreciation expense 3,614   Accumulated Depreciation - Taxi 3,614 (To record depreciation expense for 2016)

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.