On January 2, 2016, Flake Company purchased a truck for $140,000 cash. That truck has an estimated useful life of seven years and an estimated salvage value of $12,000. The straight-line method of depreciation is being used.

Required: 

A.  Prepare a schedule showing the calculation of the book value of the truck on December 31, 2019. 

B.  Assume the truck is to be disposed of on May 1, 2020. Prepare the journal entry to record the depreciation for the four months ended April 30, 2020. 

C. Assuming that the depreciation for 2020 has been brought up to date as in Part B above, prepare the journal entries to record the disposal of the truck on May 1, 2020, under each of the following unrelated assumptions: 

1.	The truck was sold for $42,000 cash.
2.	The truck was sold for $92,000 cash.
3.	The truck was retired from service, and it is expected $39,000 will be received from the sale of the salvaged materials.
4.	The truck and $110,000 cash were exchanged for office equipment that had a cash price of $200,000. The exchange had commercial substance.
5.	The truck and $130,000 cash were exchanged for a new truck that had a cash price of $215,000. The exchange has no commercial substance.
6.	The truck was completely destroyed in an accident. Cash of $49,000 is expected to be received from the insurance company.

Answer rating: 100% (QA)

Note 1 Purchase Value of Truck 140000 Salvage Value 12000 Useful Life 7 years Depreciable Value Purchase Value Salvage Value 128000 Depreciation Metho... View the full answer