(Learning Objectives 1, 3, 4: Measure a plant asset’s cost; calculate UOPdepreciation; analyze the effect of a used asset trade-in) Canyon Truck Company is a largetrucking company. The company uses the units-of-production (UOP) method to depreciate itstrucks.To follow are facts about one Mack truck in the company’s fleet. When this truck wasacquired in 2018, the tractor-trailer had cost $450,000 and was expected to remain in servicefor 10 years or 1,000,000 miles. Its estimated residual value was $20,000. During 2018, thetruck was driven 80,000 miles; during 2019, 175,000 miles; and during 2020, 185,000 miles.After the truck was driven 40,000 miles in 2021, the company traded in the Mack truck fora Freightliner truck with a fair market value of $250,000. In addition to the trade-in of theMack truck, Canyon paid cash of $30,000 for the Freightliner truck. Determine Canyon’s gainor loss on the transaction. Prepare the journal entry to record the trade-in of the old truck for thenew one. Use two decimal places for depreciation cost per mile.
(Learning Objectives 1, 3, 4: Measure a plant asset’s cost; calculate UOP
depreciation; analyze the effect of a used asset trade-in) Canyon Truck Company is a large
trucking company. The company uses the
trucks.
To follow are facts about one Mack truck in the company’s fleet. When this truck was
acquired in 2018, the tractor-trailer had cost $450,000 and was expected to remain in service
for 10 years or 1,000,000 miles. Its estimated residual value was $20,000. During 2018, the
truck was driven 80,000 miles; during 2019, 175,000 miles; and during 2020, 185,000 miles.
After the truck was driven 40,000 miles in 2021, the company traded in the Mack truck for
a Freightliner truck with a fair market value of $250,000. In addition to the trade-in of the
Mack truck, Canyon paid cash of $30,000 for the Freightliner truck. Determine Canyon’s gain
or loss on the transaction. Prepare the
new one. Use two decimal places for depreciation cost per mile.
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