Question

Linton Company purchased a delivery truck for $34,000 on July 1, 2022. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2022 and 12,000 in 2023. Linton uses the straight-line method of depreciation.

Instructions

a. Compute depreciation expense for 2022 and 2023.

b. Prepare the journal entry to record 2022 depreciation.

c. Prepare the journal entry to record 2023 depreciation.

d. Show how the truck would be reported in the December 31, 2023, balance sheet.

Answer 1

(a)

Under straight line method of depreciation,
Depreciation per annum = (initial cost - salvage value)/useful life
= ($34000 - $2000)/8 = $4000
Therefore,
For 6 months of 2022:
Depreciation expenses = $4000 x (6/12) = $2000
For 2023:
Depreciation expenses = $4000

(b) & (c)

journal entries:

Date	Account title	Debit	Credit
31 dec 2022	Depreciation expense Accumulated depreciation	$2000 .	. $2000
31 dec 2023	Depreciation expense Accumulated depreciation	$4000 .	. $4000

(d)

Balance sheet:

Equipment Less: accumulated depreciation- equipment	$34000 ($6000)
	$28000