Question

What is the accumulated depreciation and the depreciation expense of the Truck using this data: Dec....

What is the accumulated depreciation and the depreciation expense of the Truck using this data:

Dec. 01, 2019 Miller Delivery Service Inc began operations by receiving $35,000 cash and a truck with a fair market value of $25,000, salvage value of 1,000, and a 5 year Useful life from Robert Miller. The business issued miller 40,000 shares of the $1 Par common stock in exchange for this contribution.
Dec. 02 Paid $1,000 cash for a four-month insurance policy. This policy begins December 1st.
Dec. 03 Paid $600 cash for office supplies.
Dec. 05 Performed delivery services for a customer and received $2,000 cash.
Dec. 07 Completed a delivery job, billed the customer for $2,500 and received a promise to collect the $2,500 within one week.
Dec. 08 Start writing a Bond contract to raise $100,000 for more trucks and a garage type building to hold them in.
Dec. 09 Purchased $300 of fuel for the truck, on account.
Dec. 12 Received $45,000 cash for performing delivery services.
Dec. 13 Collected $800 in advance for delivery services to be performed later.
Dec. 15 Collected $1,500 cash from a customer on account.
Dec. 18 Paid employee salary, $2,000.
Dec. 21 Issued $100,000, 5%, 10 year Bonds @ 105. Interest to be paid Jun 30 & Dec 30 each year starting in June of next year.
Dec. 22 Performed delivery services on account for $700.
Dec. 23 Paid office rent of 1,600 for the month of December.
Dec. 25 Purchased a Lot of land with a Fair market value of 40,000, and a building with a Fair Market Value of 120,000 paying a total of $150,000 in cash for both.
Dec. 27 Submitted an order to purchase two more trucks with an estimated purchase price of $35,000 each.
Dec. 28 Paid $300 on account.
Dec. 30 Cash dividend of $3,000 was paid to stockholders. Since there is only one stockholder, there is no Declaration or Record Date for this transaction.

Homework Answers

Answer #1

Depreciation Expense = (Cost of Asset - Salvage Value) / Useful life

= ($25000 - $1000) / 5

= $24000 / 5

= $4800

Depreciation expense for December month = $4800*1/12 = $400

Journal entries for Depreciation:

Depreciation Expense Account ..... Debit $400

Accumulated Depreciation Account .... Credit $400

Note:

Business started as on December 01, so there is no any other balance in Accumulated Depreciation Account therefore Depreciation expense of $400 is credited only in Accumulated Depreciation Account.

Order of 2 more Truck does not take place so Depreciation is not charged.  

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