On January 1, 2015, the records of Smita Corporation showed the following:
Truck (estimated residual value, $ 3,000) ............$ 18,000
Accumulated depreciation (straight line, two years) ....... 6,000
On September 30, 2015, the delivery truck was a total loss as a result of an accident. As the truck was insured, the company collected $ 7,600 cash from the insurance company on October 5, 2015.
Required:
1. Based on the data given, compute the estimated useful life of the truck.
2. Prepare all journal entries to record the events that occurred on September 30 and October 5, 2015, and the related adjustments to the accounts. Show computations.