On January 1, 2018, a company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line method of depreciation was used. The annual depreciation recorded each year (2018-2021) was $6,000 [(45,000 - 3,000) = 42,000/7]. Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1, 2022, under the following assumption: The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000. This transaction has commercial substance. GENERAL JOURNAL Date Account Titles and Explanation PR Debit Credit Sept. 1 2022 Record depreciation for 2022. Show calculation below. Sept. 1 2022 Record exchange (with commercial substance) of old equipment and cash for new equipment. Calculation of gain (loss): Cost Less: Accumulated depreciation Book value Trade-in value Gain (loss)

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Description: On January 1, 2018, a company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line method of depreciation was used. The annual depreciation reco

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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On January 1, 2018, a company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of
seven years and an estimated salvage value of $3,000. The straight-line method of depreciation was used.
The annual depreciation recorded each year (2018-2021) was $6,000 [(45,000 - 3,000) = 42,000/7].

Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1, 2022,
under the following assumption:

The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000.
This transaction has commercial substance.

GENERAL JOURNAL

Date	Account Titles and Explanation	PR	Debit	Credit
Sept. 1	2022

		Record depreciation for 2022. Show calculation below.



Sept. 1	2022




		Record exchange (with commercial substance) of old
		equipment and cash for new equipment.

		Calculation of gain (loss):
		Cost
		Less: Accumulated depreciation
		Book value
		Trade-in value
		Gain (loss)

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Depreciation expense is the reduction in the value of an asset due to normal wear and tear, the passage of time, etc.

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