he following transactions and adjusting entries were completed by Legacy Furnitu
ID: 2581706 • Letter: H
Question
he following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used.
Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles.
Year 1 Jan. 4 Purchased a used delivery truck for $28,000, paying cash. Nov. 2 Paid garage $635 for miscellaneous repairs to the truck. Dec. 31 Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $4,640 for the truck. Year 2 Jan. 6 Purchased a new truck for $49,400, paying cash. Apr. 1 Sold the used truck purchased on Jan. 4 of Year 1 for $15,180. (Record depreciation to date in Year 2 for the truck.) June 11 Paid garage $470 for miscellaneous repairs to the truck. Dec. 31 Recorded depreciation for the new truck. It has an estimated residual value of $9,470 and an estimated life of five years. Year 3 July 1 Purchased a new truck for $55,400, paying cash. Oct. 2 Sold the truck purchased January 6, Year 2, for $17,498. (Record depreciation to date for Year 3 for the truck.) Dec. 31 Recorded depreciation on the remaining truck purchased on July 1. It has an estimated residual value of $12,955 and an estimated useful life of eight years.Explanation / Answer
Year1.
January 04:
Delivery truck a/c $ 28000
To cash. $ 28000
(Being purchase of delivery truck recorded)
Nov 2
Repairs and maintenance a/c $ 635
To cash. $635
(Being repairs and maintenance expenses incurred to truck)
Dec 31
Depreciation account Dr. 5840
To delivery truck. 5840
(Being depreciation charged to delivery truck)
Profit and loss account Dr. $6475
To repairs and maintenance. 635
To depreciation. 5840
(Being depreciation and repairs expense charged to p & l account)
Year 2
Jan 6
Truck account. Dr. $49400
To cash. $49400
(Being new truck purchased for cash recorded)
Apr 01
Depreciation account Dr(5840*3/12). 1460
To delivery truck. 1460
(Being depreciation charged to date)
Cash a/c. Dr $15180
Loss on sale of delivery truck Dr. $5520
To delivery truck. $ 20700
(Being sold off delivery truck for loss)
June 11
miscellaneous expenses a/c. Dr 470
To cash. 470
(Being miscellaneous expenses paid)
dec 31
Depreciation. A/c. Dr (49400-9470)/5). 7986
To. Truck a/c. 7986
(Being depreciation charged)
Profit and loss account. Dr $ 15436
To loss on sale of delivery truck. $5520
To depreciation $ 9446(7986+1460)
To miscellaneous expenses. $470
(Being expense transferred to p& l account)
Year 3
July 01
truck account. Dr $55400
To cash. $55400
(Being new truck purchased recorded)
Oct 02
Depreciation Account. Dr. $ 5990 (7986*9/12)
To truck account. $5990
(Being depreciation charged to truck account)
Cash a/c. Dr. 17498
Loss on sale of truck a/c 17926
To truck account. $35424
(Being truck sold auquired during previous year)
Dec 31
Depreciation account Dr. $2652
To truck. A/c $2652
(55400-12955)/8= 5305 per year 5305/12*6
(Being depreciation charged for the year)
Dec31
Profit and loss account Dr
To loss on sale of truck. 8642
To depreciation 8642
(being expense transferred to profit and loss account)