Question

Accounting for Plant Assets

Ethan Corporation had the following transactions related to its delivery truck:

Year 1
Jan. 5	Purchased for $28,000 cash a new truck with an estimated useful life of four years and a salvage value of $4,000.
Feb. 20	Installed a new set of side-view mirrors at a cost of $80 cash.
June 9	Paid $325 for an engine tune-up, wheel balancing, and a periodic chassis lubrication.
Aug. 2	Paid a $410 repair bill for the uninsured portion of damages to the truck caused by Ethan's own driver.
Dec. 31	Recorded depreciation on the truck for the year.

Year 2
May 1	Installed a set of parts bins in the truck at a cost of $950 cash. This expenditure was not expected to increase the salvage value of the truck.
Dec. 31	Recorded depreciation on the truck for the year.

Year 3
Dec. 31	Recorded depreciation on the truck for the year.

Ethans’s depreciation policies include (1) using straight‑line depreciation, (2) recording depreciation to the nearest whole month, and (3) expensing all truck expenditures of $100 or less.

Required

Prepare journal entries to record these transactions and adjustments. Round all answers to the nearest dollar.

General Journal
Date	Description	Debit	Credit
YEAR 1
Jan. 5	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record purchase of truck.
Feb. 20	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record cost of installing side-view mirrors.
June 9	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record cost of tune-up, wheel balancing and lubrication.
Aug. 2	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record cost of repairing uninsured damages.
Dec. 31	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	AnswerAccumulated Depreciation - Delivery TruckCashDelivery TruckDepreciation Expense - Delivery TruckTruck Repairs & Maintenance Expense	Answer	Answer
	To record depreciation on delivery truck.

Answer 1

Depreciation Expense = SLN(Cost, Salvage Value, Life of asset)

D Journal Entries 1 Debit ($) Credit ($) Date Account Titles 2 Year - 1 5-Jan Delivery Truck $ 28,000 4 $ 28,000 Cash |(To record the purchase) 20-Feb Delivery Truck 80 Cash 80 8 (To record cost of installing side view mirrors) Truck Reapirs & Maintenance Expense 9. 9-Jun 325 10 Cash 325 11 (To record cost of tune-up, wheel balancing and lubrication) 12 2-Aug Truck Reapirs & Maintenance Expense 410 13 Cash 410 14 |(To record the repair) 31-Dec Depreciation Expense - Delivery Truck 15 $ 6,020 16 Accumulated Depreciation - Delivery Truck 6,020 17 |(To record the depreciation expense) 18 19 %24 %24 %24

Depreciation Expense = SLN($28080,$4000,4) = $6,020

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