On January 1, 2020, Silverio Oil Company purchased a drilling truck for $500,000 by paying $100,000 cash and signing a $400,000, note for the balance. Silverio expects the truck to last eight years with an estimated salvage value of $20,000 at the end of that time.

REQUIRED:

1. Prepare the journal entry to record the purchase of the drilling truck.
2. Compute the annual depreciation expense and book value of the drilling truck for 2020 and 2021 under the following depreciation methods: (a) straight-line and (B) double-declining balance.
3. Prepare the journal entry to record the depreciation expense under (a) straight-line and (B) double-decliningbalance for 2021.
4. Show how the Drilling truck will be reported on the 12/31/2021 balance sheet if the company uses the double declining balance depreciation.

5. Assume that Silver Oil Company uses the Straight-line depreciation method. If the drilling truck is sold for $300,000 on April 1, 2023, what would be the gain or loss on the sale of drilling truck? Prepare the journal entry to record the sale of drilling truck.