The Borrell Company purchased four delivery trucks on January 2, 2007 for $22,000 each. The company expected
Question:
The Borrell Company purchased four delivery trucks on January 2, 2007 for $22,000 each. The company expected two of the trucks to last five years and have a residual value of $3,500 each. The other two trucks had an expected life of eight years and no residual value. The company uses straight-line depreciation on a composite basis.
Required
Prepare journal entries to record the following events:
1. January 1, 2009. One of the two trucks expected to last five years is destroyed in an accident. The truck was not insured and the scrap value is $400.
2. January 5, 2009. A new truck is acquired for $26,000. It has an expected life of four years and a residual value of $3,920.
3. Depreciation expense for 2009.
Step by Step Answer:
1 2009 Jan 1 Cash 400 Accumulated Depreciation Equipment 21600 Equipment 22000 To rec...View the full answer
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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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