City Taxi Service purchased a new auto to use as a taxi on January 1, Year 1, for $25,100. In addition, City paid sales tax and title fees of $910 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $6,550. Required a. Using the straight-line method, compute the depreciation expense for Year 1 and Year 2. b & c. Assume that the taxi was sold on January 1, Year 3, for $20,960. Prepare the general journal entries to record the Year 1 depreciation and sale of the taxi in Year 3.
City Taxi Service purchased a new auto to use as a taxi on January 1, Year 1, for $25,100. In addition, City paid sales tax and title fees of $910 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $6,550. Required a. Using the straight-line method, compute the depreciation expense for Year 1 and Year 2. b & c. Assume that the taxi was sold on January 1, Year 3, for $20,960. Prepare the general journal entries to record the Year 1 depreciation and sale of the taxi in Year 3.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 2RE: Akron Incorporated purchased an asset at the beginning of Year 1 for 375,000. The estimated residual...
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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![City Taxi Service purchased a new auto to use as a taxi on January 1, Year 1, for $25,100. In addition, City paid sales tax and title fees of
$910 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $6,550.
Required
a. Using the straight-line method, compute the depreciation expense for Year 1 and Year 2.
b & c. Assume that the taxi was sold on January 1, Year 3, for $20,960. Prepare the general journal entries to record the Year 1
depreciation and sale of the taxi in Year 3.
Complete this question by entering your answers in the tabs below.
Req A
Req B and C
Assume that the taxi was sold on January 1, Year 3, for $20,960. Prepare the general journal entries to record the Year 1 depreciation
and sale of the taxi in Year 3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
View transaction list
Journal entry worksheet
<
2
Record entry for sale of taxi and gain on sale.
Note: Enter debits before credits.
Date
Year 3 Accumulated depreciation
General Journal
Cash
Gain on sale
Taxi
Debit
7,056
20,960
Credit
>](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe20e069e-a614-48d3-9024-fb962771dcf1%2F8d2a41a3-d992-4839-910b-550f108bf7c2%2F3i1rox_processed.jpeg&w=3840&q=75)
Transcribed Image Text:City Taxi Service purchased a new auto to use as a taxi on January 1, Year 1, for $25,100. In addition, City paid sales tax and title fees of
$910 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $6,550.
Required
a. Using the straight-line method, compute the depreciation expense for Year 1 and Year 2.
b & c. Assume that the taxi was sold on January 1, Year 3, for $20,960. Prepare the general journal entries to record the Year 1
depreciation and sale of the taxi in Year 3.
Complete this question by entering your answers in the tabs below.
Req A
Req B and C
Assume that the taxi was sold on January 1, Year 3, for $20,960. Prepare the general journal entries to record the Year 1 depreciation
and sale of the taxi in Year 3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
View transaction list
Journal entry worksheet
<
2
Record entry for sale of taxi and gain on sale.
Note: Enter debits before credits.
Date
Year 3 Accumulated depreciation
General Journal
Cash
Gain on sale
Taxi
Debit
7,056
20,960
Credit
>
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