II- (20 points) HGV Co. purchased a truck on Jan. 3, 2012 for $295,000 paying $5
ID: 2600293 • Letter: I
Question
II- (20 points) HGV Co. purchased a truck on Jan. 3, 2012 for $295,000 paying $55, 000 cash and $240,000 N/P. The truck is estimated to run 135,000 miles. and to have salvage value of $25,000 at retirement. The truck is used for 3 years with the following milage: 2012, 38, 000 miles 2013, 32,000 miles 2014 27,000 miles a) journal and depreciation Expense for each of the 3 years indicated. b) Compute Accumulated Depreciation and Book Value at the end of ize the truck purchase and depreciation transactions method based on milage: compute cost per mile the three years after which the truck is sold. 1Explanation / Answer
a) Depreciation to be charged for each mile run = ($295,000-$25,000)/135,000 = $2.1852 per mile
Depreciation expense for 2012 = 38,000 x $2 = $76,000
Depreciation expense for 2013 = 32,000 x $2 = $64,000
Depreciation expense for 2014 = 27,000 x $2 = $54,000
Date
Particulars
Debit
Credit
Jan 3, 2012
Truck A/C
$295,000
Cash
$55,000
Notes Payable
$240,000
Dec 31, 2012
Depreciation Expense - Truck
$76,000
Accumulated Depreciation
$76,000
Dec 31, 2013
Depreciation Expense - Truck
$64,000
Accumulated Depreciation
$64,000
Dec 31, 2014
Depreciation Expense - Truck
$54,000
Accumulated Depreciation
$54,000
b) Accumulated Depreciation at the end of three years = $76,000 + $64,000 + $54,000 = $194,000
Book value at the end of three years = Purchase price – Accumulated Depreciation
=> $295,000 - $194,000 = $101,000
c)
Condition
Particulars
Debit
Credit
1
Cash
$132,000
Profit on Sale of Truck
$31,000
Truck A/C
$101,000
2
Cash
$74,000
Loss on Sale of Truck
$27,000
Truck A/C
$101,000
Condition
Particulars
Debit
Credit
3
New Truck A/C
$281,000
Old Truck A/C
$101,000
Cash
$180,000
Date
Particulars
Debit
Credit
Jan 3, 2012
Truck A/C
$295,000
Cash
$55,000
Notes Payable
$240,000
Dec 31, 2012
Depreciation Expense - Truck
$76,000
Accumulated Depreciation
$76,000
Dec 31, 2013
Depreciation Expense - Truck
$64,000
Accumulated Depreciation
$64,000
Dec 31, 2014
Depreciation Expense - Truck
$54,000
Accumulated Depreciation
$54,000