#1 Prepare a depreciation schdue for the assets in the following transactions us
ID: 2751789 • Letter: #
Question
#1 Prepare a depreciation schdue for the assets in the following transactions using the straight line method of depreciation:
A: Flash Enterprises purchased 3 new delivery trucks at a cost of $45,000 each. Each truck as an estimated useful life of 5 years.
B: Flash neede a new forklift to be used in warehouse operations at a cost of $12,500. The old forklift was traded in for $1,500.
#2 Analzye the results.
A: Flash has an opportunity to sell one of the trucks fro Question 1(a) above after 3 years for a price of $15,000. Should they accept the offer? Why or Why Not?
B: The used forklift from question 1(b) above had an orginal cost of $10,000 and a book value of 500 at the time of trade in. Calculate any gain or loss an show the appropriate journal entry.
Explanation / Answer
For forklift the adjusted basis for depreciation would be 12500 - 1500 = 11000
Now divide the adjusted basis with the number of years or life of the assets to get the depreciation per year.
For 3 trucks For 1 truck Purchases $ 135,000 $ 45,000 Depreciation for year 1 $ 27,000 $ 9,000 Depreciation for year 2 $ 27,000 $ 9,000 Depreciation for year 3 $ 27,000 $ 9,000 Depreciation for year 4 $ 27,000 $ 9,000 Depreciation for year 5 $ 27,000 $ 9,000 a) Purchase price $ 45,000 Accumulated depreciation after 3 years $ 27,000 Book value at end of 3 years $ 18,000 Sales price $ 15,000 Loss on sale of truck $ (3,000) Should reject the sales as there is loss on the sales b) Book value at the time of sales $ 500 Sales price $ 1,500 Gain on sales of forklift $ 1,000 Journal entry Cash $ 1,500 Accumulated depreciation $ 9,500 Gain on asset disposal $ 1,000 Forklift $ 10,000Related Questions
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