Question

On July 1, 2013, Farm Fresh Industries purchased a specialized delivery truck for $232,600. At the...

On July 1, 2013, Farm Fresh Industries purchased a specialized delivery truck for $232,600. At the time, Farm Fresh estimated the truck to have a useful life of eight years and a residual value of $31,000. On March 1, 2018, the truck was sold for $100,000. 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 2018.
2. Prepare the journal entry to record the sale of the truck.
3. Assuming that the truck was sold for $131,000, prepare the journal entry to record the sale.

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Homework Answers

Answer #1

1) Journal entry

Date account and explanation debit credit
2018 Depreciation expense (232600-31000/8)*2/12 4200
Accumulated depreciation- Delivery truck 4200
(To record dep)

2) Journal entry

Accumulated dep = (232600-31000/8)*4.5+4200 = 117600

Date account and explanation debit credit
2018 Cash 100000
Accumulated depreciation- Delivery truck 117600
Loss on sale of truck 15000
Delivery truck 232600
(To record sale of truck)

3) Journal entry

Accumulated dep = (232600-31000/8)*4.5+4200 = 117600

Date account and explanation debit credit
2018 Cash 131000
Accumulated depreciation- Delivery truck 117600
Gain on sale of truck 16000
Delivery truck 232600
(To record sale of truck)
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