The Borrell Company purchased four delivery trucks on January 2, 2010 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.
Prepare journal entries to record the following events:
1. January 1, 2012. 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, 2012. 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 2012.