Concept explainers
Introduction:
Asset is a term used to define a resource owned by a company against which some income will earn in near future and that income will expressed in monetary terms. Recording of an asset is done via
To determine:
Journalize the entries of the events occurred

Explanation of Solution
Journal entry will be recorded as under:
In the books of Yoshi company
| | | $ | $ |
01.01.2014 | Truck A/c | Dr. | 22000 | |
| To Cash A/c | Cr. | | 22000 |
| (Being asset recorded) | | | |
| | | | |
31.12.2014 | Depreciation Expense A/c | Dr. | 4000 | |
| To | Cr. | | 4000 |
| (Being Depreciation on Asset (Truck) recorded) | | | |
| | | | |
31.12.2015 | Depreciation Expense A/c | Dr. | 5200 | |
| To Accumulated Depreciation A/c | Cr. | | 5200 |
| (Being Depreciation on Asset (Truck) recorded) | | | |
| | | | |
31.12.2016 | Depreciation Expense A/c | Dr. | 5200 | |
| To Accumulated Depreciation A/c | Cr. | | 5200 |
| (Being Depreciation on Asset (Truck) recorded) | | | |
| | | | |
31.12.2016 | Cash A/c | Dr. | 5300 | |
| Loss on sale of Truck A/c | Dr. | 2300 | |
| To Trucks A/c | Cr. | | 7600 |
| (Being Truck sold in cash recorded) | | | |
Explanation:
Year 2014
Given:
Cost of Asset for the year 2014 is $ 22000,
Residual value is $ 2000,
Useful life of Truck is 5 Years
Formula used:
For computation of cost of Truck
Cost of Truck | $ |
Original value of asset at the beginning of year | xxxx |
Add: Expenditure capitalized during the year | xxxx |
Less: Depreciation for the year | xxxx |
Asset value at the end of year | xxxx |
For calculating Depreciation under straight line method
Cost of Asset- Residual Value
Useful life of Asset
Calculation:
*Computation of Cost of Truck
Cost of Truck | $ |
Cash | 20515 |
Sales tax | 1485 |
Total | 22000 |
$ 22000- $ 2000
5
$ 20000/5
$ 4000
Year 2015
Given:
Cost of Asset for the year 2015 is $ 18000,
Residual value is $ 2400,
Useful life of truck reduced from 5 years to 4 years, as one year already passed so remaining useful life is 3 years in the year 2015
Formula used:
For computation of cost of Truck
Cost of Truck | $ |
Original value of asset at the beginning of year | xxxx |
Add: Expenditure capitalized during the year | xxxx |
Less: Depreciation for the year | xxxx |
Asset value at the end of year | xxxx |
For calculating Depreciation under straight line method
Cost of Asset- Residual Value
Useful life of Asset
Calculation:
*Computation of Cost of Truck
Cost of Truck | $ |
Asset value in the year 2014 | 22000 |
Less: Depreciation for the year 2014 | 4000 |
Asset value at the beginning of year 2015 | 18000 |
$ 18000- $ 2400
3
$ 15600/3
$ 5200
Year 2016
Given:
Cost of Asset for the year 2016 is $ 12800,
Residual value is $ 2400,
Remaining useful life of Truck is 2 years in year 2016
Formula used:
For computation of cost of Truck
Cost of Truck | $ |
Original value of asset at the beginning of year | xxxx |
Add: Expenditure capitalized during the year | xxxx |
Less: Depreciation for the year | xxxx |
Asset value at the end of year | xxxx |
For calculating Depreciation under straight line method
Cost of Asset- Residual Value
Useful life of Asset
Formula for calculating profit or loss on sale of asset
Calculation of profit or loss on sale of asset | $ |
Original value of asset | xxxx |
Less: Depreciation for the used period | xxxx |
Asset value at the time of sale | xxxx |
Less: Sale value | xxxx |
Profit / Loss on sale of Asset | xxxx |
Calculation:
*Computation of Cost of Truck
Cost of Truck | $ |
Asset value in the year 2015 | 18000 |
Less: Depreciation for the year 2015 | 5200 |
Asset value at the beginning of year 2016 | 12800 |
$ 12800- $ 2400
2
$ 10400/2
$ 5200
*Computation of Cost of Truck at the time of sale
Cost of Truck | $ |
Truck value at the beginning of year 2016 | 12800 |
Less: Depreciation for the year 2016 | 5200 |
Truck value at the time of sale | 7600 |
Sale of Truck in Cash | 5300 |
Loss on sale of Truck ($ 7600- $ 5300) | 2300* |
*Loss on sale of truck will be recorded as expenses under Profit & Loss A/c
Events and transaction are recorded in the form of journal entries as and when it occurred.
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