# Yoshi Company completed the following transactions and events involving its delivery trucks. ...

## Question:

Yoshi Company completed the following transactions and events involving its delivery trucks.

2015:

Jan. 1 Paid $22,015 cash plus$1,635 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. 2016: Dec. 31 Due to new information obtained earlier in the year, the truck?s estimated useful life was changed from five to four years, and the estimated salvage value was increased to 2,550. Recorded annual straight-line depreciation on the truck 2017: Dec. 31 Recorded annual straight-line depreciation on the truck. Dec. 31 Sold the truck for$5,600 cash.

Required:

1. Calculate depreciation for the year 2016.

2. Calculate book value and gain (loss) for sale of the truck in December 2017.

3. Prepare journal entries to record these transactions and events.

## Depreciation

Depreciation is the expense associated with the regular use or wear and tear of assets. Common methods of computing depreciation are straight-line, sum of the years, units-of-production and double declining method.

1. Calculation of depreciation for the year 2016 is as follows:

 Cost 22,015 Less: Salvage value 2,150 Depreciable cost 19,865 Divide by: Estimated life 5 years Annual Depreciation (2015) 3,973

Carrying value on 2016 = Cost - Depreciation

Carrying value on 2016 = 22,015 - 3,973

Carrying value on 2016 = 18,042

 Carrying value on 2016 18,042 Less: Revised Salvage value 2,550 Revised Depreciable cost 15,492 Divide by: Revised remaining life (4 years less 1) 3 years Revised Annual Depreciation, 2016 5,164

2. Calculation of the book value and gain (loss) for sale of the truck in December 2017 is as follows:

 Cost: 22,015 Less: Depreciation Depreciation 2015 3,973 Depreciation 2016 5,164 Depreciation 2017 5,164 Total Depreciation 14,301 Book value, 2017 7,714 Selling price 5,600 Loss on sale 2,114

3. Journal entries to record these transactions and events are as follows:

 Account Debit Credit 2015 To record purchase of truck Trucks 22,015 Sales tax 1,635 Cash 23,650 To record depreciation for 2015 Depreciation expense 3,973 Accumulated depreciation 3,973 2016 To record depreciation for 2016 Depreciation expense 5,164 Accumulated depreciation 5,164 2017 To record depreciation for 2017 Depreciation expense 5,164 Accumulated depreciation 5,164 To record sale of truck Cash 5,600 Accumulated depreciation 14,301 Loss on sale 2,114 Truck 22,015