Question

Transactions for Fixed Assets, Including Sale 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. Purchased a used delivery truck for $24,000, paying cash. 8 Mar. Paid garage $900 for changing the oil, replacing the oil filter, and tuning the engine on 7. the delivery truck. Dec. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the 31. truck is four years, with a residual value of $4,000 for the truck Year 2. Jan. Purchased a new truck for $50,000, paying cash. 9. Feb. Paid garage $250 to tune the engine and make other minor repairs on the used truck. 28. Apr. Sold the used truck for $9,500. (Record depreciation to date in Year 2 for the truck.) 30. Dec. Record depreciation for the new truck. It has an estimated residual value of $12,000 31 and an estimated life of eight years Year 3 Sept Purchased a new truck for $58,500, paying cash 1 Sept. Sold the truck purchased January 9, Year 2, for $36,000. (Record depreciation to date 4. for Year 3 for the truck.) Dec. Recorded depreciation on the remaining truck. It has an estimated residual value of 31. $16,000 and an estimated useful life of 10 years Required:

Answer 1

Year Credit Date Jan 8 Debit $24,000.00 Particulars Vehicle - Truck No 1 Cash (Being Used Truck purchased) $24,000.00 Mar 7 $900.00 Repairs and Maintainance Cash (Being payment made for repair of truck) $900.00 Dec 31 $11,803.00 Depreciation Accumulated Depreciation - Truck (Being Depreciation provided) $11,803.00 2 Jan 9 $50,000.00 Vehicle - Truck No 2 Cash (Being Truck purchased) $50,000.00 2 Feb 28 $250.00 Repairs and Maintainance Cash (Being payment made for repair of truck) $250.00 2 April 30 $2,005.00 Depreciation Accumulated Depreciation - Truck (Being Depreciation provided) $2,005.00 2 April 30 Accumulated Depreciation - Truck Cash Loss on sale of asset Vehicle - Truck No 2 (Being loss on sale of asset truck no 1) $13,808.00 $9,500.00 $692.00 $24,000.00

2 Dec 31 $12,226.00 Depreciation Accumulated Depreciation - Truck (Being Depreciation provided) $12,226.00 3 Sept 1 $58,500.00 Vehicle - Truck No 3 Cash (Being Truck purchased) $58,500.00 Sept 4 $6,391.00 Depreciation Accumulated Depreciation - Truck (Being Depreciation provided) $6,391.00 3 Sept 4 Accumulated Depreciation - Truck $18,617.00 $36,000.00 Cash Profit on sale of asset Vehicle - Truck No 2 (Being profit on sale of asset truck no 1) $4,617.00 $50,000.00 3 Dec 31 $3,911.00 Depreciation Accumulated Depreciation - Truck (Being Depreciation provided) $3,911.00

Working Double Declining Balance Method (DDBM) = (2/Usefule Life* Book Value)/365* No of days used (a) Assets - Truck No 1 Usefule life : 4 years Particulars Date No of days Purchase Less : Depreciation for the year [(2/4 x $24000)/365 x 359] 31-Dec-12 359.00 Written Down Book Value Less: Depreciation up date of sale [(2/4 x $12197)/365 x 120] 30-Apr-13 120.00 Written Down Book Value on the date of sale 8-Jan-12 Amount $24,000.00 ($11,803.00) $12,197.00 ($2,005.00) $10,192.00 Sale Value Less : Written Down Book Value on the date of sale Loss on sale of asset $9,500.00 ($10,192.00) ($692.00) Assets - Truck No 2 Usefule life : 8 years Purchase Less : Depreciation for the year [(2/8 x $50000)/365 x 357] Written Down Book Value Less: Depreciation up date of sale [(2/8 x $37774)/365 x 247] Written Down Book Value on the date of sale Date No of days Amount 9-Jan-13 $50,000.00 31-Dec-13 357.00 | ($12,226.00) $37,774.00 4-Sep-14 247.00 ($ 6,391.00) $31,383.00 Sale Value Less : Written Down Book Value on the date of sale Profit on sale of asset $36,000.00 ($31,383.00) $4,617.00

(c) Assets - Truck No 3 Usefule life : 10 years Purchase Less : Depreciation for the year [(2/10 x $58500)/365 x 122] Written Down Book Value Date No of days 1-Sep-14 31-Dec-14 122.00 Amount $58,500.00 ($3,911.00) $54,589.00