AMERCO is the holding company for U-Haul International and its subsidiaries. Footnote 3 from the annual report for fiscal year 2011 indicated:

Property, plant and equipment are stated at cost. Depreciation is computed for financial reporting purposes using the straight-line or an accelerated method based on a declining balance formula over the estimated useful lives.. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment are netted against depreciation expense when realized.

1. Assume that U-Haul acquires some new trucks on January 1, 2011, for $100 million. The useful life is 1 year. Expected residual values are $82 million. Prepare a summary journal entry for depreciation on these trucks for 2011. The 2011 fiscal year ends on March 31, 2011.

2. Prepare a summary journal entry for depreciation for the first 9 months of fiscal 2012 (April 1, 2011 through December 31, 2011).

3. Assume that U-Haul sells the trucks for $88 million cash on December 31, 2011. Prepare the journal entry for the sale. U-Haul considers the trucks to be “revenue-earning equipment.”

4. What is the total depreciation expense on these trucks for fiscal 2012? If U-Haul could have exactly predicted the $88 million proceeds when it originally acquired the trucks, what would depreciation expense have been in fiscal 2011? In fiscal 2012? Explain.