Question

On July 1, 2016, Farm Fresh Industries purchased a specialized delivery truck for $158,800. At the...

On July 1, 2016, Farm Fresh Industries purchased a specialized delivery truck for $158,800. At the time, Farm Fresh estimated the truck to have a useful life of eight years and a residual value of $34,000. On March 1, 2021, the truck was sold for $75,000. Farm Fresh uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service.

Required:
1. Prepare the journal entry to update depreciation in 2021.
2. Prepare the journal entry to record the sale of the truck.
3. Assuming that the truck was instead sold for $97,000, prepare the journal entry to record the sale.

Business   Accounting   
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Homework Answers

Answer #1

Annual depreciation = (158800-34000)/8 = 15600

No. date accounts debit credit
1 March 1, 2021 Depreciation expense (15600*2/12) 2600
Accumulated depreciation 2600
2 March 1, 2021 cash 75000
Accumulated depreciation (15600*4.5 years + 2600) 72800
Loss on sale of truck 11000
Truck 158800
3 March 1, 2021 cash 97000
Accumulated depreciation (15600*4.5 years + 2600) 72800
Gain on sale of truck 11000
Truck 158800
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