Transactions for Fixed Assets, Including Sale The following transactions and adj

Question

Transactions for Fixed Assets, Including Sale The following transactions and adjusting entries were completed by Robinson 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. 8. Purchased a used delivery truck for $38,400, paying cash. Mar. 7. Paid garage $170 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck. Dec. 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is 8 years, with a residual value of $8,100 for the truck. Year 2 Jan. 9. Purchased a new truck for $44,100, paying cash. Feb. 28. Paid garage $320 to tune the engine and make other minor repairs on the used truck. Apr. 30. Sold the used truck for $25,300. (Record depreciation to date in Year 2 for the truck.) Dec. 31. Record depreciation for the new truck. It has an estimated trade-in value of $7,900 and an estimated life of 7 years. Year 3 Sept. 1. Purchased a new truck for $96,000, paying cash. Sept. 4. Sold the truck purchased January 9, Year 2, for $26,800. (Record depreciation to date in Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $17,300 and an estimated useful life of 10 years. Required: Journalize the transactions and the adjusting entries. If an amount box does not require an entry, leave it blank. Do not round intermediate calculations. Round your final answers to the nearest cent.

Explanation / Answer

Solution:

Date Particulars Debit Credit Year 1 Jan. 8 Delivery Truck 1 38,400 Cash 38,400 Mar. 7 Truck Repair Expense 170 Cash 170 Dec. 31 Depreciation Expense - Delivery Truck 1 9,600 Accumulated Depreciation ­ Delivery Truck 1 9,600 Depreciation (38,400 * 2/8) = 9,600 Book Value of Delivery Truck 1 (38,400 - 9,600) = 28,800 Year 2 Jan. 9 Delivery Truck 2 44,100 Cash 44,100 Feb. 28 Truck Repair Expense 320 Cash 320 Apr. 30 Depreciation Expense - Delivery Truck 1 2,400 Accumulated Depreciation - Delivery Truck 1 2,400 Depreciation (28,800 * 4/12 * 2/8) = 2,400 Accumulated Depreciation on the old truck is now (2,400 + 9,600) = 12,000 To Record the Sale: Cash 25,300 Accumulated Depreciation - Delivery Truck 1 12,000 Loss on Disposal of Delivery Truck 1 1,100 Delivery Truck 38,400 Dec. 31 Depreciation Expense ­ Delivery Truck 2 12,600 Accumulated Depreciation - Delivery Truck 2 12,600 Depreciation (44,100 * 2/7) = 12,600 Book Value of Delivery Truck 2 = 44,100 - 12,600 = 31,500 Year 3 Sept. 1 Delivery Truck 3 96,000 Cash 96,000 Sept. 4 Depreciation Expense - Delivery Truck 2 6,000 Accumulated Depreciation - Delivery Truck 2 6,000 Depreciation (31,500 * 8/12 * 2/7) = 6,000 Accumulated Depreciation on the old truck is now (6,000 + 12,600) = 18,600 To Record the Sale: Cash 26,800 Accumulated Depreciation - Delivery Truck 2 18,600 Gain on Disposal 1,300 Delivery Truck 44,100 Dec. 31 Depreciation Expense ­ Delivery Truck 3 19,200 Accumulated Depreciation ­Delivery Truck 19,200 Depreciation (96,000 * 2/10) = 19,200 Book Value of Delivery Truck 3 (96000 - 19200) = 76800

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