The Twombly Company purchased a new automobile in May 1975. The automobile cost ($ 8,800). It was
Question:
The Twombly Company purchased a new automobile in May 1975. The automobile cost \(\$ 8,800\). It was estimated that the automobile would be driven for 100,000 miles before being traded in and that its salvage value at that time would be \(\$ 800\).
Odometer readings are as follows:
On June 16, 1980, the automobile was traded in for a new one with a list price of \(\$ 10,000\). The old automobile had a fair market value of \(\$ 800\), but the dealer allowed \(\$ 1,500\) on it toward the list price of the new one. The balance of the purchase price was paid by check.
a Determine the depreciation charges for each year through 1979 using a "production" or "use" method.
b Record the entries for June 16, 1980, assuming that the list price of the new automobile is unreliable whereas the fair market value of the old is reliable.
c Record the entries for June 16, 1980, assuming that there were no reliable estimates for the fair market value of the old automobile.
Step by Step Answer:
Financial Accounting An Introduction To Concepts Methods And Uses
ISBN: 9780030452963
2nd Edition
Authors: Sidney Davidson, Roman L. Weil, Clyde P. Stickney