The following transactions and adjusting entries were completed by Robinson Furniture Co. during a three-year period

The following transactions and adjusting entries were completed by Robinson 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.

Year 1

Jan.

  8. Purchased a used delivery truck for $24,000, paying cash.

Mar.

  7. Paid garage $900 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.

Dec.

 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is four years, with a residual value of $4,000 for the truck.

Year 2

Jan.

  9. Purchased a new truck for $50,000, paying cash.

Feb.

 28. Paid garage $250 to tune the engine and make other minor repairs on the used truck.

Apr.

 30. Sold the used truck for $9,500. (Record depreciation to date in Year 2 for the truck.) 

Dec.

 31. Record depreciation for the new truck. It has an estimated residual value of $12,000 and an estimated life of eight years.

Year 3

Sept.

  1. Purchased a new truck for $58,500, paying cash.

  4. Sold the truck purchased January 9, Year 2, for $36,000. (Record depreciation to date for Year 3 for the truck.)

Dec.

 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $16,000 and an estimated useful life of 10 years.

Instructions

Journalize the transactions and the adjusting entries.

Answer:

 Year 1

 Jan. 8 Delivery Truck24,000

Cash24,000

 Mar. 7 Truck Repair Expense900

Cash900

 Dec. 31 Depreciation Expense—Delivery Truck 12,000

Accum. Depreciation—Delivery Truck 12,000

Delivery truck depreciation

[$24,000 × (100% ÷ 4) × 2].

 Year 2

 Jan. 9 Delivery Truck50,000

Cash50,000

 Feb. 28 Truck Repair Expense250

Cash250

 Apr. 30 Depreciation Expense—Delivery Truck 2,000

Accum. Depreciation—Delivery Truck 2,000

Delivery truck depreciation

[($24,000 – $12,000) × 

(100% ÷ 4) × 2 × (4 ÷ 12)].

30 Accum. Depreciation—Delivery Truck 14,000

Cash9,500

Loss on Sale of Delivery Truck 500

Delivery Truck24,000

 Dec. 31 Depreciation Expense—Delivery Truck 12,500

Accum. Depreciation—Delivery Truck 12,500

Delivery truck depreciation

[$50,000 × (100% ÷ 8) × 2].

1 Delivery Truck58,500

Cash58,500

4 Depreciation Expense—Delivery Truck 6,250

Accum. Depreciation—Delivery Truck 6,250

Delivery truck depreciation

[($50,000 – $12,500) × 

(100% ÷ 8) × 2 × (8 ÷ 12)].

4 Cash36,000

Accum. Depreciation—Delivery Truck 18,750

Delivery Truck50,000

Gain on Sale of Delivery Truck4,750

31 Depreciation Expense—Delivery Truck 3,900

Accum. Depreciation—Delivery Truck 3,900

Delivery truck depreciation

[$58,500 × (100% ÷ 10) × 2 × (4 ÷ 12)].