Question

A truck was acquired on July 1, 2018, at a cost of $311,850. The truck had a six-year useful life and an estimated salvage value of $34,650. The straight-line method of depreciation was used. On January 1, 2021, the truck was overhauled at a cost of $28,875, which extended the useful life of the truck for an additional two years beyond that originally estimated (salvage value is still estimated at $34,650). In computing depreciation for annual adjustment purposes, expense is calculated for each month the asset is owned.

Answer 1

Details Amount($)

Cost $311,850

Less: Salvage value ($34,650)

Depreciation base July 1, 2018 $277,200

Less: Depreciation to date ($277,200/6)*2.5 ($115,500)

Depreciation base Jan 1, 2021 (unadjusted) $161,700

Overhaul $28,875

Depreciation base Jan 1, 2021 (adjusted) $190,575

Date Particulars Debit($) Credit($)

2021, Jan 1 Depreciation accumulated A/c Dr $34,650

To cash A/c $34,650

2021, Dec 31 Expense for depreciation A/c Dr $19,922

($109,575/5.5)

To Depreciation accumulated A/c $19,922