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)

Name: On January 1, 2018, a company purchased a delivery truck for $45,000 c
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
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

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 11PA: Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and...

See similar textbooks

Related questions

Concept explainers

Topic Video

Question

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)

Expert Solution

Step 1

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

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions