Exercise 8-9A

City Taxi Service purchased a new auto to use as a taxi on January 1, 2016, for 36,000. In addition, City paid sales tax and title fees for $1,200 for the vehicle. The tax is expected to have a five-year life and a salvage value of $4,000.

Required

a. Using the straighy-line method, compute the depreciation expense for 2016 and 2017.

b. Prepare the general joural entry to record the 2016 depreciation.

c. Assume that the taxi was sold on January 1, 2018, for 22,000. Prepare the journal entry for the sale of the taxi in 2018.