Yoshi Company completed the following transactions and events involving its delivery trucks. Year 1 Jan. 1 Paid $20,515 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. Year 2 Dec. 31 The truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,400. Recorded annual straight-line depreciation on the truck. Year 3 Dec. 31 Recorded annual straight-line depreciation on the truck. 31 Sold the truck for $5,300 cash. Required Prepare journal entries to record these transactions and events.
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.
Yoshi Company completed the following transactions and events involving its delivery trucks.
Year 1
Jan. 1 Paid $20,515 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year
life and a $2,000 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec. 31 Recorded annual straight-line
Year 2
Dec. 31 The truck’s estimated useful life was changed from five to four years, and the estimated salvage
value was increased to $2,400. Recorded annual straight-line depreciation on the truck.
Year 3
Dec. 31 Recorded annual straight-line depreciation on the truck.
31 Sold the truck for $5,300 cash.
Required
Prepare
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