Question

1	On January 1, 2017, Aylmer Inc purchased a truck for $100,000. The truck has an estimated
	useful life of 4 years, and a residual value of $10,000.
	REQUIRED:
	a. Calculate deprecaition, by year using the double-declining-balance method.
	b. If at the end of 2019, Aylmer traded the truck for another truck. Aylmer paid cash of $4,500
	and the fair value of the truck was $15,000. What is the journal entry if the transaction has
	commercial substance?

Answer 1

a) Depreciation under double decline method is calculated below:

Given That

Cost of Truck = $100,000

Salavage Value = $10,000

Useful Life = 4 years

Depreciation for 2017 = 1/4 years *100*2 = 50%

Depreciation for 2017 = $100,000*50% = $50,000

b)Journal Entry for the transaction has commercial substance is as follows:

Date	Account and Explanation	Debit($)	Credit($)
Ending 2019	Accumulated Depreciation	87,500
	Loss on exchange	2,000
	Truck	15,000
	Cash		4,500
	Truck		100,000
	(Recorded the sale of assets with the commercial substance)