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On January 1, 2018, PA had purchased a $85,000 truck for delivering appliances to customers. Initially, we planned on driving the truck for six years

On January 1, 2018, PA had purchased a $85,000 truck for delivering appliances to customers. Initially, we planned on driving the truck for six years or 360,000 kms. Expected residual value for the truck is $11,000. We currently follow the double-declining-balance method of amortization. On May 31, 2020, the truck had an accident on the highway. Luckily, our driver was ok but the truck was beyond repair. It was taken to the disposal yard, but we did not derecognize the asset at that time. Could you please tell us whether there was a gain or a loss on this truck and for how much? The payout from the claim made with our insurance provider was $25,000 cash. And please assist us with the entry related to the disposal? On August 1, 2020, we paid cash for a new truck for $100,000 plus freight in charge of $2,000 and GST of $5,000. We have had a busy year and havent recorded any transactions related to this purchase. Could you assist in this? We expect to get 240,000 kms in total from truck usage over the next 10 years. In the last 4 months of 2020, we drove the truck 15,000 kms. We expect residual value to be $4,500.

Required Assume that the amortization expense for the truck for 2018, and 2019 have already been recorded using the double-declining-balance method. (a) Calculate the gain or the loss from the disposal of the truck in 2020, clearly showing NBV. (8 marks) (b) Record the disposal of the truck on June 30, 2020. (4 marks) (c) Record the purchase of the new truck on September 1, 2020. (4 marks) (d) For our assets, we have been using the double declining balance method, but we are considering using the unit of production method. For the new truck, could you calculate the amortization for both methods? The amount would need to be pro-rated based on months of usage. (7 marks) (e) What difference would it make to our income if we were to switch to the unit of production method? (1 mark)

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