Final answer:
The student is calculating the first-year depreciation of a truck using the straight-line method. The annual depreciation is $30,000, but only half applies for the first year since the truck was purchased mid-year, leading to a depreciation expense of $15,000, which is recorded as a debit to Depreciation Expense and a credit to Accumulated Depreciation - Truck.
Step-by-step explanation:
The student is asking how to calculate and record the depreciation expense for a truck using the straight-line depreciation method. The cost of the truck is $180,000 with an estimated salvage value of $30,000 at the end of its 5-year useful life. The annual depreciation expense can be calculated by subtracting the salvage value from the cost and then dividing by the useful life of the truck.
Calculation:
- Cost of the truck: $180,000
- Salvage value: $30,000
- Useful life: 5 years
The annual depreciation expense = (Cost - Salvage value) / Useful life = ($180,000 - $30,000) / 5 = $30,000 per year
Since Harper purchased the truck on July 1st, 2021, only half of the year's depreciation applies for 2021. Therefore, the depreciation expense for the first year is half of the annual amount.
First-year depreciation expense = $30,000 / 2 = $15,000
The journal entry for recording the depreciation expense in the first year would be:
- Debit: Depreciation Expense $15,000
- Credit: Accumulated Depreciation - Truck $15,000