Answer :
In a company's accounting records, a journal entry is used to document a business transaction. Entries for Robinson Furniture Co. are given below:
Year 1
Jan. 8. Purchased a used delivery truck for $38,400, paying cash.
- Dr Truck 38,400
- Cr Cash 38,400
Mar. 7. Paid garage $170 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
- Dr Maintenance expenses - Truck 170
- Cr Cash 170
Dec. 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is eight years, with a residual value of $8,100 for the truck.
Depreciation expense = 2 x 0.25 x $38,400 = $19,200
- Dr Depreciation expense 19,200
- Cr Accumulated depreciation - truck 19,200
Year 2
Jan. 9. Purchased a new truck for $44,100, paying cash.
- Dr Truck new 44,100
- Cr Cash 44,100
Feb. 28. Paid garage $320to tune the engine and make other minor repairs on the used truck.
- Dr Maintenance expenses - Truck 320
- Cr Cash 320
Apr. 30. Sold the used truck for $25,300. (Record depreciation to date in Year 2 for the truck.)
depreciation expense = 2 x 0.25 x 4/12 x $19,200 = $3,200
- Dr Depreciation expense 3,200
- Cr Accumulated depreciation - truck 3,200
truck sold at $25,300 - $16,000 (carrying value) = -$9,300 profit on sale
- Dr Cash 25,300
- Dr Accumulated depreciation 22,400
- Cr Profit on truck 9,300
- Cr Truck 38,400
Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $7,900 and an estimated life of seven years.
Depreciation expense = 2 x 0.125 x $44,100 = $22,050
- Dr Depreciation expense 22,050
- Cr Accumulated depreciation - truck new 22,050
Year 3
Sept. 1. Purchased a new truck for $96,000, paying cash.
- Dr Truck three 96,000
- Cr Cash 96,000
Sept. 4. Sold the truck purchased January 9, Year 2, for $26,800. (Record depreciation to date for Year 3 for the truck.)
Depreciation expense = 2 x 0.125 x 8/12 x $22,050 = $3,675
- Dr Depreciation expense 3,675
- Cr Accumulated depreciation - truck new 3,675
truck sold at $26,800 - $18,375 (carrying value) = $8,425gain on sale
- Dr Cash 26,800
- Dr Accumulated depreciation 25,725
- Cr Truck new 44,100
- Cr Gain on sale - truck new 8,425
Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $17,300 and an estimated useful life of 10 years.
Depreciation expense = 2 x 0.1 x 4/12 x $96,000 = $6,400
- Dr Depreciation expense 6,400
- Cr Accumulated depreciation - truck three 6,400
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