Question

The following transactions and adjusting entries were completed by legacy 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. 4. purchased a used delivery truck for $26,000, paying cash.

nov. 2. paid garage $825 for miscellaneous repairs to the truck.

dec. 31. recorded depreciation on the truck for the year. the estimated useful life of the truck is four years, with a residual value of $2,000 for the truck.

year 2
jan. 6. purchased a new truck for $60,000, paying cash.
apr. 1. sold the used truck for $14,000. (record depreciation to date in year 2 for the truck.)
june 11. paid garage $280 for miscellaneous repairs to the truck.
dec. 31. record depreciation for the new truck. it has an estimated residual value of $7,000 and an estimated life of five years.

year 3
july 1. purchased a new truck for $65,000, paying cash.
oct. 2. sold the truck purchased
january 6, year 2, for $19,520. (record depreciation to date for year 3 for the truck.)
dec. 31. recorded depreciation on the remaining truck. it has an estimated residual value of $6,000 and an estimated useful life of eight years.

Answer 1

The student's question involves calculating depreciation for delivery trucks using the double-declining-balance method, which includes determining the depreciable amount, estimating useful life, and considering the residual values of the assets.

Step-by-step explanation:

The student's question involves calculating depreciation for delivery trucks over a three-year period using the double-declining-balance method. Depreciation is a way of allocating the cost of a tangible asset over its useful life.

In this scenario, the student has transactions that include purchasing, repairing, and selling delivery trucks. Depreciation for each truck must be calculated at the end of each fiscal year or at the time of sale, considering the estimated useful life and residual value for each truck.

Example of Calculating Depreciation for Year 1:

For the used truck purchased on January 4 in Year 1:

Depreciation rate (Double-Declining): (1/4) * 2 = 50%

Depreciable amount: $26,000 (Cost) - $2,000 (Residual value) = $24,000

Year 1 Depreciation Expense: $24,000 * 50% = $12,000

Record the depreciation expense of $12,000 for Year 1 on December 31. Subsequent years' depreciation would also consider any accumulated depreciation from the previous years and adjust for the residual value after the asset is sold. Each transaction would require a similar process taking into account the specific details like the cost and useful life of the trucks.