Nova Scotia Telecom Company had a truck that was purchased on July 7, 2018, for $36,000. The PPE subledger shows the following information regarding the truck:

A customized tool carrier was constructed and permanently fitted to the truck on July 3, 2020, at a cost of $9,600 cash. The tool carrier adds to the economic value of the truck. It will be used for the truck?s remaining life and have a zero residual value. The useful life and residual value of the truck did not change as a result of the addition of the tool carrier.

Required

1. Record the installation of the tool carrier assuming it is a component of the truck.

2. Calculate depreciation on the truck and its new component, the tool carrier, for the company?s December 31, 2020, and December 31, 2021, year-ends.

3. Calculate the book value of the truck at December 31, 2020 and 2021.

Transcribed Image Text:

Truck: Accum. Dep. at Dec. 31/19 Deprec. Date of Purchase Jul. 7/18 Jul. 7/18 Est. Est. Life 10 yr 10 yr Component Truck body Residual Method SL Cost -0- -0- $4,200 1,200 $28,000 Motor SL $36,000 $5,400