PR 10-5B Transactions for fixed assets, including sale

The following transactions, adjusting entries, and closing entries were completed by McHenry 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.
2010 Jan.   4. Purchased a used delivery truck for $54,000, paying cash.
Feb.  24. Paid garage $275 for changing the oil, replacing the oil fi lter, and tuning the engine on the delivery truck.
Dec. 31. Recorded depreciation on the truck for the fi scal year. The estimated useful life of the truck is eight years, with a residual value of $12,000 for the truck.
2011 Jan.   3. Purchased a new truck for $60,000, paying cash.
Mar.   7. Paid garage $300 to tune the engine and make other minor repairs on the used truck.
Apr.    30 Sold the used truck for $35,000. (Record depreciation to date in 2011 for the truck.)
Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $16,000 and an estimated life of 10 years.


2012 July   1. Purchased a new truck for $64,000, paying cash.
Oct.  7. Sold the truck purchased January 3, 2011, for $45,000. (Record depreciation for the year.)
Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $17,500 and an estimated useful life of 10 years.

Instructions
Journalize the transactions and the adjusting entries.

Answer:
2010 Jan. 4
Delivery Equipment...................................................... 54,000
Cash.................................................................... 54,000

Feb. 24
Truck Repair Expense.................................................. 275     Cash................................................................  275
Dec. 31
Depreciation Expense—Delivery Equipment............. 13,500  
Accumulated Depreciation—Delivery Equipment  13,500    
Delivery equipment depreciation. [$54,000 × (1/8 × 2)]  
2011 Jan. 3
Delivery Equipment...................................................... 60,000     Cash.........................................................................  60,000
Mar. 7
Truck Repair Expense.................................................. 300     Cash.........................................................................  300  
Apr. 30
Depreciation Expense—Delivery Equipment............. 3,375  
Accum. Depreciation—Delivery Equipment..........  3,375    
Delivery equipment depreciation.    
[$54,000 – $13,500 × (1/8 × 2) × 4/12]  
30
Accum. Depreciation—Delivery Equipment............... 16,875   Cash................................................. 35,000  
Loss on Sale of Delivery Equipment.................... 2,125  
Delivery Equipment.................................................  54,000
Dec. 31
Depreciation Expense—Delivery Equipment............. 12,000  
Accum. Depreciation—Delivery Equipment..........  12,000    
Delivery equipment depreciation. [($60,000 × (1/10 × 2)]

2012 July 1
Delivery Equipment......................................... 64,000
Cash.................................................  64,000
Oct. 7
Depreciation Expense—Delivery Equipment.... 7,200  
Accum. Depreciation—Delivery Equipment.  7,200    
Delivery equipment depreciation.
[$60,000 – $12,000 × (1/10 × 2) × 9/12]   7 Cash...................................................................... 45,000  
Accum. Depreciation—Delivery Equipment.................................... 19,200  
Delivery Equipment..................................................  60,000  
Gain on Sale of Delivery Equipment..................................  4,200
Dec. 31
Depreciation Expense—Delivery Equipment.............. 6,400  
Accum. Depreciation—Delivery Equipment.......... 6,400    
Delivery equipment depreciation.
[$64,000 × (1/10 × 2) × 6/12]