E8-16 Inferring Asset Age and Recording Accidental Loss on a Long-Lived Asset (Straight-Line Depreciation) On January 1, 2018, the records of Smita Corporation showed the following: Truck (estimated residual value, $3,000) Accumulated depreciation (straight line, two years) On September 30, 2018, the delivery truck was a total loss as a result of an accident. As the truck was insured, the company collected $7,600 cash from the insurance company on October 5, 2018. $18,000 6,000

E8-16 Inferring Asset Age and Recording Accidental Loss on a Long-Lived Asset (Straight-Line Depreciation) On January 1, 2018, the records of Smita Corporation showed the following: Truck (estimated residual value, $3,000) Accumulated depreciation (straight line, two years) On September 30, 2018, the delivery truck was a total loss as a result of an accident. As the truck was insured, the company collected $7,600 cash from the insurance company on October 5, 2018. $18,000 6,000

Name: Required:1. Based on the data given, compute the estimated useful lif
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Description: Required:1. Based on the data given, compute the estimated useful life of the truck.2. Prepare all journal entries to record the events that occurred on September 30 and October 5, 2018,and the related adjustments to the accounts on December 31, 201

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

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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Required:
1. Based on the data given, compute the estimated useful life of the truck.
2. Prepare all journal entries to record the events that occurred on September 30 and October 5, 2018,
and the related adjustments to the accounts on December 31, 2018. Show computations.

E8-16 Inferring Asset Age and Recording Accidental Loss on a Long-Lived Asset (Straight-Line
Depreciation)
On January 1, 2018, the records of Smita Corporation showed the following:
Truck (estimated residual value, $3,000)
Accumulated depreciation (straight line, two years)
$18,000
6,000
On September 30, 2018, the delivery truck was a total loss as a result of an accident. As the truck
was insured, the company collected $7,600 cash from the insurance company on October 5, 2018.

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