The journal entry for the purchase of the Delivery Truck on January 1, 2025, includes a debit to the "Delivery Truck" account for $50,000 and a credit to either "Cash" or "Accounts Payable" for the same amount.
On January 1, 2025, the Parker Piano Company records the purchase of the Delivery Truck with the following journal entry:
Date Account Name Debit ($) Credit ($)
Jan 1, 2025 Delivery Truck 50,000
Cash or Accounts Payable 50,000
In this entry, the company debits the "Delivery Truck" account with the total cost of the truck, which is $50,000. This amount includes not only the actual purchase price of the truck but also any additional costs incurred to get the asset ready for use, such as delivery charges or installation expenses. The "Cash" account is credited if the truck is purchased with cash, or "Accounts Payable" is credited if it's bought on credit.
This initial journal entry reflects the acquisition of the asset and establishes its cost basis for future depreciation calculations. The Delivery Truck will be depreciated over its anticipated life of 100,000 miles or 4 years, using the straight-line method, with an estimated residual value of $2,000 at the end of its service life.