Denzel Ltd purchased a delivery truck on 1 January 2013 at the cost of $35,000. The delivery truck has residual value $3,500, and it is depreciated based on 7 years' useful life using the straight-line deprecation method. The delivery truck was discarded/scrapped on 31 December 2017. Assume that the accounting period ends on 31 December. Required: a) Prepare the journal entry to record the discarding/scraping of the delivery truck on 31 December 2017. b) Instead of discarding, assume the delivery truck was sold for $15,000 cash. Prepare the journal entry to record the disposal of the delivery truck on 31 December 2017. Ignore GST. Narrations are not required. Answers: a)
Denzel Ltd purchased a delivery truck on 1 January 2013 at the cost of $35,000. The delivery truck has residual value $3,500, and it is depreciated based on 7 years' useful life using the straight-line deprecation method. The delivery truck was discarded/scrapped on 31 December 2017. Assume that the accounting period ends on 31 December. Required: a) Prepare the journal entry to record the discarding/scraping of the delivery truck on 31 December 2017. b) Instead of discarding, assume the delivery truck was sold for $15,000 cash. Prepare the journal entry to record the disposal of the delivery truck on 31 December 2017. Ignore GST. Narrations are not required. Answers: a)
Chapter1: Financial Statements And Business Decisions
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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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Transcribed Image Text:Denzel Ltd purchased a delivery truck on 1 January 2013 at the cost of $35,000. The delivery truck has residual value $3,500,
and it is depreciated based on 7 years' useful life using the straight-line deprecation method. The delivery truck was
discarded/scrapped on 31 December 2017. Assume that the accounting period ends on 31 December. Required: a) Prepare
the journal entry to record the discarding/scraping of the delivery truck on 31 December 2017. b) Instead of discarding,
assume the delivery truck was sold for $15,000 cash. Prepare the journal entry to record the disposal of the delivery truck on
31 December 2017. Ignore GST. Narrations are not required. Answers: a)
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