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Your business operates on January 1 to December 31 calendar year basis. On April 1, 2020 you purchased a new delivery truck for your business. The truck was imported from India. The price of the truck is $50,000. Other costs related to truck are as follows: insurance during transporatation $2,000, painting and lettering your company logo $500, one year road insurance $1,000, sales taxes and fees $2,500, oil and lubricants for the truck $500, import taxes $5,000. The truck's estimated useful life is 7 years and you expect that the salvage value of the truck will be $1,000.  It will be depreciated using the double declining method. Your task: Using the double declining method, prepare a full depreciation schedule for the truck. Assume that on December 31, 2024, you sell this truck for $12,000. Prepare a journal entry for this sale. Assume on December 31, 2025 the truck is destroyed in an accident and have to be disposed with no salvage. Prepare a journal entry for the disposal. Assume that on August 1, 2024, you decide to change your depreciation estimates. The new depreciation will be using the straight-line method, total useful life of the truck is estimated to be 9 years and new salvage value is estimated to be $500. Prepare a depreciation schedule for the truck using straight-line depreciation.

Your business operates on January 1 to December 31 calendar year basis. On April 1, 2020 you purchased a new delivery truck for your business. The truck was imported from India. The price of the truck is $50,000. Other costs related to truck are as follows: insurance during transporatation $2,000, painting and lettering your company logo $500, one year road insurance $1,000, sales taxes and fees $2,500, oil and lubricants for the truck $500, import taxes $5,000. The truck's estimated useful life is 7 years and you expect that the salvage value of the truck will be $1,000.  It will be depreciated using the double declining method. Your task: Using the double declining method, prepare a full depreciation schedule for the truck. Assume that on December 31, 2024, you sell this truck for $12,000. Prepare a journal entry for this sale. Assume on December 31, 2025 the truck is destroyed in an accident and have to be disposed with no salvage. Prepare a journal entry for the disposal. Assume that on August 1, 2024, you decide to change your depreciation estimates. The new depreciation will be using the straight-line method, total useful life of the truck is estimated to be 9 years and new salvage value is estimated to be $500. Prepare a depreciation schedule for the truck using straight-line depreciation.

SWFT Individual Income Taxes
SWFT Individual Income Taxes
43rd Edition
ISBN:9780357391365
Author:YOUNG
Publisher:YOUNG
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 1RP
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Your business operates on January 1 to December 31 calendar year basis.

On April 1, 2020 you purchased a new delivery truck for your business. The truck was imported from India. The price of the truck is $50,000.

Other costs related to truck are as follows: insurance during transporatation $2,000, painting and lettering your company logo $500, one year road insurance $1,000, sales taxes and fees $2,500, oil and lubricants for the truck $500, import taxes $5,000.

The truck's estimated useful life is 7 years and you expect that the salvage value of the truck will be $1,000.  It will be depreciated using the double declining method.

Your task:

  1. Using the double declining method, prepare a full depreciation schedule for the truck.
  2. Assume that on December 31, 2024, you sell this truck for $12,000. Prepare a journal entry for this sale.
  3. Assume on December 31, 2025 the truck is destroyed in an accident and have to be disposed with no salvage. Prepare a journal entry for the disposal.
  4. Assume that on August 1, 2024, you decide to change your depreciation estimates. The new depreciation will be using the straight-line method, total useful life of the truck is estimated to be 9 years and new salvage value is estimated to be $500. Prepare a depreciation schedule for the truck using straight-line depreciation.
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