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.

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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