The T-Shirt Trends Company purchased a delivery truck on October 12, 2009, at a cost of $78,900.
Question:
The T-Shirt Trends Company purchased a delivery truck on October 12, 2009, at a cost of $78,900. The delivery truck has an estimated useful life of three years and an estimated disposal value of $900.
Instructions
On the forms provided in your working papers:
1. Prepare a depreciation schedule for the delivery truck using the straight-line method.
2. Record the following transactions on general journal page 41. Post the transactions to the ledger accounts provided.
3. Answer the following questions.
a. How did you determine the depreciation from October 12 to December 31?
b. What was the book value of the truck on December 31, 2009?
c. What was the book value of the truck on December 31, 2010?
d. How did you determine the annual depreciation on December 31, 2012?
Date Transactions 2009 Dec. 31 Recorded the adjusting entry for the year's depreciation expense on the delivery truck. 2010 Dec. 31 Recorded the adjusting entry for the year's depreciation expense on the delivery truck.
Step by Step Answer:
Depreciation Schedule Year Depreciation Expense Book Value 2009 October 12Dec 31 7890031225 months 7...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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