Joel Harvey Florists acquired a truck on January 1, 2007. The company paid $11,000 for the truck, $500 for destination charges, and $250 to paint the company name on the side of the truck. The companys accounting manager estimates the truck to have a five-year useful life and a residual value of $1,750. The truck is expected to be driven 100,000 miles in five years. It is actually driven 15,000 miles in 2007, 25,000 miles in 2008, 30,000 miles in 2009, 25,000 miles in 2010, and 5,000 miles in 2011.

Part 1

On January 1, 2007, how much should Joel Harvey Florist capitalize for the cost of the truck? Write the journal entry.

Part 2

How much depreciation expenses that would be recorded for the years 2007 through 2011 using each of the following methods?

a. Straight-line

b. Unit-of-production

c. Declining-balance

Part 3

On December 31, 2011, Joel Harvey sold the truck for $3,000 cash. Compute the gain or loss on sale. Write the journal entry.