Jokoy Company completed the following transactions and events involving its delivery trucks. Depreciation for the year is recorded at the end of year on Dec 31. Year 1 January 1 Paid $22,015 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account. December 31 Recorded annual straight-line depreciation on the truck. Year 2 December 31 The truck's estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,700. Recorded annual straight-line depreciation on the truck. Assume change. occured at beginning at Year 2 (Jan 1) Year 3 December 31 Recorded annual straight-line depreciation on the truck. December 31 Sold the truck for $5,300 cash. Required: 1-a. Calculate depreciation for Year 2 with changes in useful life and salvage value noted above 1-b. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3. 1-c. Prepare journal entries to record these transactions and events.
Jokoy Company completed the following transactions and events involving its delivery trucks. Depreciation for the year is recorded at the end of year on Dec 31. Year 1 January 1 Paid $22,015 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account. December 31 Recorded annual straight-line depreciation on the truck. Year 2 December 31 The truck's estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,700. Recorded annual straight-line depreciation on the truck. Assume change. occured at beginning at Year 2 (Jan 1) Year 3 December 31 Recorded annual straight-line depreciation on the truck. December 31 Sold the truck for $5,300 cash. Required: 1-a. Calculate depreciation for Year 2 with changes in useful life and salvage value noted above 1-b. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3. 1-c. Prepare journal entries to record these transactions and events.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:Jokoy Company completed the following transactions and events involving its delivery trucks. Depreciation for the year is
recorded at the end of year on Dec 31.
Year 1
January 1 Paid $22,015 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year
life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account.
December 31 Recorded annual straight-line depreciation on the truck.
Year 2
December 31 The truck's estimated useful life was changed from five to four years, and the estimated salvage.
value was increased to $2,700. Recorded annual straight-line depreciation on the truck. Assume change
occured at beginning at Year 2 (Jan 1)
Year 3
December 31 Recorded annual straight-line depreciation on the truck.
December 31 Sold the truck for $5,300 cash.
Required:
1-a. Calculate depreciation for Year 2 with changes in useful life and salvage value noted above
1-b. Calculate book value and gain (loss) for sale of Truck on December 31, Year 3.
1-c. Prepare journal entries to record these transactions and events.
Complete this question by entering your answers in the tabs below.
Required 1A Required 1B Required 1C
Calculate depreciation for Year 2.
Total cost
Less accumulated depreciation (from Year 1)
Book value
Less revised salvage value
Remaining cost to be depreciated
Years of life remaining
Total depreciation for Year 2
< Required 1A
Required 1B >
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