The following transactions and adjusting entries were completed by Legacy Furniture Co. during a 3-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4. Purchased a used delivery truck for $29,200, paying cash. Nov. 2. Paid garage $650 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is 4 years, with a residual value of $4,505 for the truck. Year 2 Jan. 6. Purchased a new truck for $49,900, paying cash. Apr. 1. Sold the used truck for $15,710. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $495 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $8,790 and an estimated life of 5 years. Year 3 July 1. Purchased a new truck for $55,320, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $17,708. (Record depreciation to date for Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $11,715 and an estimated useful life of 8 years. Required: Journalize the transactions and the adjusting entries.
The following transactions and adjusting entries were completed by Legacy Furniture Co. during a 3-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4. Purchased a used delivery truck for $29,200, paying cash. Nov. 2. Paid garage $650 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is 4 years, with a residual value of $4,505 for the truck. Year 2 Jan. 6. Purchased a new truck for $49,900, paying cash. Apr. 1. Sold the used truck for $15,710. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $495 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $8,790 and an estimated life of 5 years. Year 3 July 1. Purchased a new truck for $55,320, paying cash. Oct. 2. Sold the truck purchased January 6, Year 2, for $17,708. (Record depreciation to date for Year 3 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $11,715 and an estimated useful life of 8 years. Required: Journalize the transactions and the adjusting entries.
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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The following transactions and adjusting entries were completed by Legacy Furniture Co. during a 3-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.
| Year 1 | |
| Jan. 4. | Purchased a used delivery truck for $29,200, paying cash. |
| Nov. 2. | Paid garage $650 for miscellaneous repairs to the truck. |
| Dec. 31. | Recorded depreciation on the truck for the year. The estimated useful life of the truck is 4 years, with a residual value of $4,505 for the truck. |
| Year 2 | |
| Jan. 6. | Purchased a new truck for $49,900, paying cash. |
| Apr. 1. | Sold the used truck for $15,710. (Record depreciation to date in Year 2 for the truck.) |
| June 11. | Paid garage $495 for miscellaneous repairs to the truck. |
| Dec. 31. | Record depreciation for the new truck. It has an estimated residual value of $8,790 and an estimated life of 5 years. |
| Year 3 | |
| July 1. | Purchased a new truck for $55,320, paying cash. |
| Oct. 2. | Sold the truck purchased January 6, Year 2, for $17,708. (Record depreciation to date for Year 3 for the truck.) |
| Dec. 31. | Recorded depreciation on the remaining truck. It has an estimated residual value of $11,715 and an estimated useful life of 8 years. |
| Required: | |
| Journalize the transactions and the adjusting entries. |
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