
Journalize the transactions and

Explanation of Solution
Disposal of Assets: Disposal is an activity of selling the worn-out assets that is no longer in need for the business, in return of some consideration. Disposal may be made in any of the following situations:
- Disposal with no gain no loss: When the asset is disposed with no consideration received.
- Disposal with gain: When the asset is disposed for more than its book value (original cost less
accumulated depreciation ). - Disposal with loss: When the asset is disposed for less than its book value.
Double-declining-balance method: It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:
Journalize the transactions and adjusting entries for Year 1.
Date | Account Title and Explanation | Post Ref |
Debit ($) | Credit ($) |
Year 1 | ||||
January 8 | Delivery Truck | 24,000 | ||
Cash | 24,000 | |||
(To record the purchase of an used delivery truck.) | ||||
March 7 | Truck Repair Expense | 900 | ||
Cash | 900 | |||
(To record the truck repair expense incurred.) | ||||
December 31 | Depreciation Expense-Delivery Truck | 12,000 (1) | ||
Accumulated depreciation-Delivery Truck | 12,000 | |||
(To record the depreciation expense for the used delivery truck.) |
Working note 1: Determine the amount of depreciation expense of the used delivery truck for the year1.
Cost of the used delivery truck= $24,000
Estimated Useful Life =4 years
Year 1
January 8: Record the purchase of an used delivery truck.
- Delivery Truck is an asset, and it is increased by $24,000. Therefore, debit Delivery Truck account by $24,000.
- Cash is an asset, and it is decreased by $24,000. Therefore, credit cash with $24,000.
March 7: Record the miscellaneous repairs expense incurred for delivery truck.
- Truck Repairs Expense is an expense and a component of
stockholders’ equity. It is increased by $900 which reduces the stockholders’ equity. Therefore, debit Truck Repairs Expense account by $900. - Cash is an asset, and it is decreased by $900. Therefore, credit cash with $900.
December 31: Record an adjusting entry for depreciation expense.
- Depreciation expense-Delivery Truck is an expense and a component of stockholders’ equity. It is increased by $12,000 which reduces the stockholders’ equity. Therefore, debit Depreciation Expense-Delivery Truck account by $12,000.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The increase in accumulated depreciation decreases the asset by $12,000. Therefore, credit Accumulated depreciation – Delivery Truck by $12,000.
Journalize the transactions and adjusting entries for Year 2.
Date | Account Title and Explanation | Post Ref |
Debit ($) | Credit ($) |
Year 2 | ||||
January 9 | Delivery Truck | 50,000 | ||
Cash | 50,000 | |||
(To record the purchase of delivery truck.) | ||||
February 28 | Truck Repair Expense | 250 | ||
Cash | 250 | |||
(To record the truck repair expense incurred.) | ||||
April 30 | Depreciation Expense-Delivery Truck | 2,000 (2) | ||
Accumulated depreciation-Delivery Truck | 2,000 | |||
(To record the depreciation expense for the used delivery truck.) | ||||
April 30 | Cash | 9,500 | ||
Accumulated depreciation-Delivery Truck | 14,000 | |||
Loss on sale of Delivery Truck | 500(3) | |||
Delivery Truck | 24,000 | |||
(To record the sale of the used delivery truck.) | ||||
December 31 | Depreciation Expense-Delivery Truck | 12,500 (4) | ||
Accumulated depreciation-Delivery Truck | 12,500 | |||
(To record the depreciation expense for the new truck.) |
Table (2)
Working note 2: Calculate the Depreciation expense for the used delivery truck sold.
Cost of the used delivery truck =$24,000
Accumulated Depreciation =$12,000 (1)
Estimated Useful Life =4 years
Number of months used in Year 2 = 4months (January 1-April 30)
Working note 3: Calculate the gain or (loss) on the sale of the used delivery truck.
Cash received on sale =$9,500
Cost of the used delivery truck =$24,000
Accumulated Depreciation =
Working note 4: Determine the amount of depreciation expense of the new delivery truck for the year2.
Cost of the new delivery truck= $50,000
Estimated Useful Life =8 years
Year 2
January 9: Record the purchase of a new delivery truck.
- Delivery Truck is an asset, and it is increased by $50,000. Therefore, debit Delivery Truck account by $50,000.
- Cash is an asset, and it is decreased by $50,000. Therefore, credit cash with $50,000.
February 28: Record the miscellaneous repairs expense incurred for delivery truck.
- Truck Repairs Expense is an expense and a component of stockholders’ equity. It is increased by $250 which reduces the stockholders’ equity. Therefore, debit Truck Repairs Expense account by $250.
- Cash is an asset, and it is decreased by $250. Therefore, credit cash with $250.
April 30: Record the depreciation expense for the used delivery truck.
- Depreciation expense-Delivery Truck is an expense and a component of stockholders’ equity. It is increased by $2,000 which reduces the stockholders’ equity. Therefore, debit Depreciation Expense-Delivery Truck account by $2,000.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The increase in accumulated depreciation decreases the asset by $2,000. Therefore, credit Accumulated depreciation – Delivery Truck by $2,000.
April 30: Record the sale of the used delivery truck.
- Cash is an asset, and it is increased by $9,500. Therefore, debit cash with $9,500.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $14,000. Therefore, debit Accumulated depreciation – Delivery Truck by $14,000.
- Loss on Sale of Delivery Truck is a loss for the company, and it decreases the stockholder’s equity by $500. Therefore, debit Loss on Sale of Delivery Truck by $500.
- Delivery Truck is an asset, and it is decreased by $24,000. Therefore, credit Delivery Truck account by $24,000.
December 31: Record an adjusting entry for depreciation expense.
- Depreciation expense-Delivery Truck is an expense and a component of stockholders’ equity. It is increased by $12,500 which reduces the stockholders’ equity. Therefore, debit Depreciation Expense-Delivery Truck account by $12,500.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The increase in accumulated depreciation decreases the asset by $12,500. Therefore, credit Accumulated depreciation – Delivery Truck by $12,500.
Journalize the transactions and adjusting entries for Year 3.
Date | Account Title and Explanation | Post Ref |
Debit ($) | Credit ($) |
Year 3 | ||||
September 1 | Delivery Truck | 58,500 | ||
Cash | 58,500 | |||
(To record the purchase of delivery truck.) | ||||
September 4 | Depreciation Expense-Delivery Truck | 6,250 (5) | ||
Accumulated depreciation-Delivery Truck | 6,250 | |||
(To record the depreciation expense for the delivery truck purchased in Year 2.) | ||||
September 4 | Cash | 36,000 | ||
Accumulated depreciation-Delivery Truck | 18,750 | |||
Gain on sale of Delivery Truck | 4,750 (6) | |||
Delivery Truck | 50,000 | |||
(To record the sale of the delivery truck purchased on Year 2.) | ||||
December 31 | Depreciation Expense-Delivery Truck | 3,900 (7) | ||
Accumulated depreciation-Delivery Truck | 3,900 | |||
(To record the depreciation expense for the new truck of Year 3.) |
Table (3)
Working note 5:
Calculate the Depreciation expense for the delivery truck of Year 2 sold.
Cost of the delivery truck purchased in Year 2 =$50,000
Accumulated Depreciation =
Estimated Useful Life =8 years
Number of months used in Year 3 = 8 months (January 1-August 31)
Working note 6: Calculate the gain or (loss) on the sale of the delivery truck of Year 2.
Cash received on sale =$36,000
Cost of the delivery truck of Year 2 =$50,000
Accumulated Depreciation =
Working note 7: Determine the amount of depreciation expense of the new delivery truck for the year3.
Cost of the new delivery truck= $58,500
Estimated Useful Life =10 years
Number of months used = 4 months (September 1-December 31)
Year 3
September 1: Record the purchase of a new delivery truck.
- Delivery Truck is an asset, and it is increased by $58,500. Therefore, debit Delivery Truck account by $58,500.
- Cash is an asset, and it is decreased by $58,500. Therefore, credit cash with $58,500.
September 4: Record the depreciation expense for the delivery truck of Year 2.
- Depreciation expense-Delivery Truck is an expense and a component of stockholders’ equity. It is increased by $6,250 which reduces the stockholders’ equity. Therefore, debit Depreciation Expense-Delivery Truck account by $6,250.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The increase in accumulated depreciation decreases the asset by $6,250. Therefore, credit Accumulated depreciation – Delivery Truck by $6,250.
September 4: Record the sale of the delivery truck of Year 2.
- Cash is an asset, and it is increased by $36,000. Therefore, debit cash with $36,000.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The decrease in accumulated depreciation increases the asset by $18,750. Therefore, debit Accumulated depreciation – Delivery Truck by $18,750.
- Gain on Sale of Delivery Truck is a gain for the company, and it decreases the stockholder’s equity by $4,750. Therefore, credit Gain on Sale of Delivery Truck by $4,750.
- Delivery Truck is an asset, and it is decreased by $58,500. Therefore, credit Delivery Truck account by $58,500.
December 31: Record an adjusting entry for depreciation expense for the new delivery tuck of Year 3.
- Depreciation expense-Delivery Truck is an expense and a component of stockholders’ equity. It is increased by $3,900 which reduces the stockholders’ equity. Therefore, debit Depreciation Expense-Delivery Truck account by $3,900.
- Accumulated depreciation-Delivery Truck is a contra-asset with a normal credit balance. The increase in accumulated depreciation decreases the asset by $3,900. Therefore, credit Accumulated depreciation – Delivery Truck by $3,900.
Want to see more full solutions like this?
Chapter 10 Solutions
Financial Accounting
- Watson Industries has a predetermined overhead rate of 65% of direct labor cost. During the month, $420,000 of factory labor costs are incurred, of which $120,000 is indirect labor. Actual overhead incurred was $250,000. What would be the amount debited to the Work in Process Inventory? Find outarrow_forwardPlease provide the correct answer to this general accounting problem using valid calculations.arrow_forwardDetermine the inventory turnover for Harbor Supply Co. based on the following information: • Beginning Inventory: $120,000 • Ending Inventory: $135,000 Cost of Goods Sold (COGS): $8,500,000 If the industry average for inventory turnover is 45, compare Harbor Supply Co.'s inventory turnover to the industry standard.arrow_forward
- Watson Industries has a predetermined overhead rate of 65% of direct labor cost. During the month, $420,000 of factory labor costs are incurred, of which $120,000 is indirect labor. Actual overhead incurred was $250,000. What would be the amount debited to the Work in Process Inventory?arrow_forwardA company uses a process costing system. Its finishing department's beginning inventory consisted of 48,500 units, 40% complete with respect to direct labor and overhead. The department completed and transferred out 110,000 units during this period. The ending inventory consists of 38,000 units, which are 20% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $29,500 and overhead costs of $35,500 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is_. Answerarrow_forwardA company uses a process costing system. Its finishing department's beginning inventory consisted of 48,500 units, 40% complete with respect to direct labor and overhead. The department completed and transferred out 110,000 units during this period. The ending inventory consists of 38,000 units, which are 20% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $29,500 and overhead costs of $35,500 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is_.arrow_forward
- What are the incremental free cash flows associated with the new machine in year 3?arrow_forwardPlease provide the correct answer to this financial accounting problem using valid calculations.arrow_forwardI am looking for help with this general accounting question using proper accounting standards.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
