Question

Project 1.4 Topic: Long-Term Assets Part 1

On 1/1/20X1, Illini Company acquires one truck and one car for a lump sum of $60,000. The fair values of the truck and the car are $50,000 and $30,000, respectively. The expected useful life of the truck and car is 10 years, and the expected residual values for the truck and car are $2,000 and $1,000, respectively. Illini accounts for the truck and car using the straight line method.

On 1/1/20X2, Illini trades in the car plus $10,000 cash for a newer one. The fair value of the newer car is $30,000. The expected useful life of the newer car is 10 years, and its expected residual value is $1,000. Illini accounts for the new car using the straight line method.

Please refer to the instructions and the table in this question. Enter the correct journal entry for part [A].

The Balance Sheet of the Illini as of 12/31/20X0:

Illini Company, Inc.
Balance Sheet
as of 12/31/20X0
Assets
Current Assets:
Cash			$1,500,000
Accounts receivable, net			18,000
Inventory			50,000
Total current assets			1,568,000
Equipment			90,000
Goodwill			20,000
Total assets			$1,678,000
Liabilities and shareholders' equity
Shareholders' equity:
Common stock, 20,000 shares outstanding, $1 par			$20,000
Additional paid-in capital			280,000
Retained earnings			1,378,000
Total shareholders' equity			1,678,000
Total liabilities and shareholders' equity			$1,678,000

• Note that all additional paid-in capital (APIC) sub accounts (e.g., APIC-options and APIC-treasury stock), if any, are tracked in the “Additional paid-in capital” account on the Balance Sheet.

Project 1.4 Part 1 Journal Entries

Date	Account Name (Debit)	Account Name (Credit)	Debit	Credit
1/1/20X1	Truck		[A]
	Car		[B]
		Cash		[C]
12/31/20X1	Depreciation expense		[D]
		Accumulated depreciation-Truck		[E]
		Accumulated depreciation-Car		[F]
1/1/20X2	Car-New		[G]
	Accumulated depreciation-Car		[H]
	Loss		[I]
		Cash		[J]
		Car		[K]
12/31/20X2	Depreciation expense		[L]
		Accumulated depreciation-Truck		[M]
		Accumulated depreciation-Car-New		[N]

enter answers for journal items ([A] to [N]

Answer 1

Journal Entries