(Learning Objectives 1, 3, 4: Measure a plant asset’s cost; calculate UOP depreciation; analyze the effect of a used asset trade-in) Concord Truck Company is a large truckingcompany. The company uses the units-of-production (UOP) method to depreciate its trucks.To follow are facts about one Mack truck in the company’s fleet. When this truck wasacquired in 2018, the tractor-trailer rig had cost $420,000 and was expected to remain in servicefor 10 years or 1,000,000 miles. Its estimated residual value was $100,000. During 2018, the truckwas driven 77,000 miles; during 2019, 175,000 miles; and during 2020, 190,000 miles. After thetruck was driven 45,000 miles in 2021, the company traded in the Mack truck for a Freightlinertruck with a fair market value of $270,000. In addition to the trade-in of the Mack truck, ConcordTruck Company paid cash of $31,000 for the Freightliner truck. Determine Concord’s gain or losson the transaction. Prepare the journal entry to record the trade-in of the old truck for the new 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) Concord Truck Company is a large trucking
company. The company uses the
To follow are facts about one Mack truck in the company’s fleet. When this truck was
acquired in 2018, the tractor-trailer rig had cost $420,000 and was expected to remain in service
for 10 years or 1,000,000 miles. Its estimated residual value was $100,000. During 2018, the truck
was driven 77,000 miles; during 2019, 175,000 miles; and during 2020, 190,000 miles. After the
truck was driven 45,000 miles in 2021, the company traded in the Mack truck for a Freightliner
truck with a fair market value of $270,000. In addition to the trade-in of the Mack truck, Concord
Truck Company paid cash of $31,000 for the Freightliner truck. Determine Concord’s gain or loss
on the transaction. Prepare the journal entry to record the trade-in of the old truck for the new one.
Use two decimal places for depreciation cost per mile.
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