Instructions The following transactions and adjusting entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. Year 1 Jan. 4. Purchased a used delivery truck for $27,680, paying cash. Nov. 2. Paid garage $725 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $4,900 for the truck. Year 2 Jan. 6. Purchased a new truck for $49,850, paying cash. Apr. 1. Sold the used truck for $15,050. (Record depreciation to date in Year 2 for the truck.) June 11. Paid garage $450 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $9,185 and an estimated life of five years. Year 3 July 1. Oct. 2. Purchased a new truck for $53,640, paying cash. Sold the truck purchased January 6, Year 2, for $17,607. (Record depreciation to date for Year 3 for the truck.) Recorded depreciation on the remaining truck. It has an estimated residual value of $12,345 and an estimated useful life of eight years. Dec. 31. Chart of Accounts General Ledger ASSETS REVENUE 410 Sales 610 Interest Revenue 110 Cash 111 Petty Cash 112 Accounts Receivable 114 Interest Receivable 620 Gain on Sale of Delivery Truck 621 Gain on Sale of Equipment 115 Notes Receivable EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Delivery Truck 523 Delivery Expense 116 Merchandise Inventory 117 Supplies 119 Prepaid Insurance 120 Land 123 Delivery Truck 124 Accumulated Depreciation-Delivery Truck 125 Equipment 126 Accumulated Depreciation-Equipment 130 Mineral Rights 131 Accumulated Depletion 132 Goodwill 133 Patents 525 Truck Repair and Maintenance Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Equipment 533 Depletion Expense 534 Amortization Expense-Patents 535 Insurance Expense 536 Supplies Expense LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable 539 Miscellaneous Expense 710 Interest Expense 720 Loss on Sale of Delivery Truck 721 Loss on Sale of Equipment EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends JOURNAL Score: 66/76 ACCOUNTING EQUATION POST. REF. CREDIT ASSETS LIABILITIES EQUITY DATE lan 4 DEBIT 27680.00 27,680.00 DESCRIPTION Delivery Truck Cash Truck Repair and Maintenance Expense Cash Adjusting Entries Nov.2 725.00 725.000 Dec. 31 Depreciation Expense-Delivery Truck 13,726.00 Delivery Truck 13,726,00 Points: 13.03/15 Journalize the Year 2 fransactions and adjusting entries on Page 2 How does grading work? JOURNAL Score: 135/150 CREDIT PAGE 2 ACCOUNTING EQUATION ASSETS LIABILITIES EQUITY DESCRIPTION POST. REF. DATE Jan 6 DEBIT 49,850.00 Delivery Truck 49,850.00 Apr. 10 Depreciation Expense-Delivery Truck 1,739.00 Accumulated Depreciation Delivery Truck 1,739.00 Cash 15,050.000 Accumulated Depreciation-Delivery Truck 15,466.00 Delivery Truck Cain on Sale of Delivery Truck 27,680.00 2,836.00 Jun. 11 Truck Repair and Maintenance Expense 450.00 Cash 450.00 Dec. 31 Adjusting Entries Depreciation Expense-Delivery Truck Accumulated Depreciation-Delivery Truck 19,66700 19,667.00 Journal Shaded cells have feedback. Points: 28.1/29 Journalize the Year 3 transactions and adjusting entries on Page 3. How does grading work? PAGE 3 ACCOUNTING EQUATION JOURNAL Score: 111/125 DESCRIPTION POST. REF. CREDIT ASSETS LIABILITIES EQUITY DATE Jul. 1' Delivery Truck DEBIT 55,54000 Cash 55,640.00 Oct. 2 9,129.00 9,129.00 Depreciation Expense-Delivery Truck Accumulated Depreciation-Delivery Truck Cash Loss on Sale of Delivery Truck Oct. 2 17,602.00 3,447.00 Accumulated Depreciation-Delivery Truck 28. 296.00 Delivery Truck 49,850.00 Adjusting Entries Dec. 31' Depreciation Expense-Delivery Truck 6,760.00 Accumulated Depreciation-Delivery Truck 6,760.00 Points: 21.31 /24 Feedback Check My Work Expenditures that improve the asset are recorded as increases to the fixed asset. Expenditures that are ordinary maintenance and repairs are expensed. Pay attention to the dates fixed assets were purchased and/or sold. Compare the book value amount to the sale price. If the book value is less than the sale price, the asset was sold for a gain. If the book value is more than the sale price, the asset was sold for a loss. If you no longer have the fixed asset what accounts would have to be eliminated? In the first year, the balance in the accumulated depreciation account is zero. Remember not to reduce book value below residual value
