Practice Question

A depreciation schedule for semi-trucks of Whispering Manufacturing Company was requested by your auditor soon after December 31, 2018, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2015 to 2018, inclusive. The following data were ascertained.

Balance of Trucks account, Jan. 1, 2015
Truck No. 1 purchased Jan. 1, 2012, cost		$20,880
Truck No. 2 purchased July 1, 2012, cost		25,520
Truck No. 3 purchased Jan. 1, 2014, cost		34,800
Truck No. 4 purchased July 1, 2014, cost		27,840
Balance, Jan. 1, 2015		$109,040

The Accumulated Depreciation-Trucks account previously adjusted to January 1, 2015, and entered in the ledger, had a balance on that date of $35,032 (depreciation on the four trucks from the respective dates of purchase, based on a 5-year life, no salvage value). No charges had been made against the account before January 1, 2015. Transactions between January 1, 2015, and December 31, 2018, which were recorded in the ledger, are as follows.

July 1, 2015		Truck No. 3 was traded for a larger one (No. 5), the agreed purchase price of which was $46,400. Whispering. paid the automobile dealer $25,520 cash on the transaction. The entry was a debit to Trucks and a credit to Cash, $25,520. The transaction has commercial substance.
Jan. 1, 2016		Truck No. 1 was sold for $4,060 cash; entry debited Cash and credited Trucks, $4,060.
July 1, 2017		A new truck (No. 6) was acquired for $48,720 cash and was charged at that amount to the Trucks account. (Assume truck No. 2 was not retired.)
July 1, 2017		Truck No. 4 was damaged in a wreck to such an extent that it was sold as junk for $812 cash. Whispering received $2,900 from the insurance company. The entry made by the bookkeeper was a debit to Cash, $3,712, and credits to Miscellaneous Income, $812, and Trucks, $2,900.

Entries for straight-line depreciation had been made at the close of each year as follows:

2015, $24,360;

2016, $26,100;

2017, $29,058;

2018, $35,264.

For each of the 4 years, compute separately the increase or decrease in net income arising from the companys errors in determining or entering depreciation or in recording transactions affecting trucks, ignoring income tax considerations. (Enter credit, understated and decrease amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Per Company Books

As Adjusted

Net

Trucks dr. (cr.)

Acc. Dep. Trucks dr. (cr.)

Retained Earnings dr. (cr.)

Trucks dr. (cr.)

Acc. Dep., Trucks dr, (cr.)

Retained Earnings dr, (cr.)

Income Overstated (Understated)

1/1/15

Balance

$

$

$

$

$

$

$

7/1/15

Purchase Truck #5

Trade Truck #3

12/31/15

Depreciation

12/31/15

Balances

1/1/16

Sale of Truck #1

12/31/16

Depreciation

12/31/16

Balances

7/1/17

Purchase of Truck #6

7/1/17

Disposal of Truck #4

12/31/17

Depreciation

12/31/17

Balances

12/31/18

Depreciation

12/31/18

Balance

$

$

$

$

$

$

$

Prepare one compound journal entry as of December 31, 2018, for adjustment of the Trucks account to reflect the correct balances as revealed by your schedule, assuming that the books have not been closed for 2018. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

Practice Question Hall cks of Whispering depre edule for semi g Company was sted by 2018, sh ditions, reti nts, depreciatian, ata affectinq of th period 2013 018, ind 4-y nq d Balance of Trucks account, Jan 2015 Truck No ed Jan. 2012, cost $20,88 purc ck N Truck No. 3 purc ed Ja 20) 4, cost 34 B00 27 HAD Balance, $109,040 2015 The Accumulated Deprec on-Trucks account previously adjusted to and nuary entered in the ledger, ha e on that d of $35,032 e to rucks from epreciation dates y 1, Decemb 1, 2018, which ck No. 3 w aded rger one (No. 5 he agree e price of 2015 $46.400. paid the $25,520 cash debit Truck to Cash, $25,520. Th Truck No ld for $4,060 entry debited C $4r060 truck (No. acquired for $18,7 0 cash charge mount to the Tnucks Assume truck No. retired. Truck No. 4 damaged in a reck to such extent that it old as junk fo 2017 $812 cash. Whisp ng received 32,900 from mpany. The entry made by th e bookkeeper was a debit to Ca $3,712 edits to cellaneous $812 ks, $2,gou. Entri es for straight-line dapradation had heat da at the close of each ye follows 2015, $24 2016, $26.100 2017, $29,058 2018, $25.264. h of tha 4 yo parately th rising fron pilte the company s et rs in determining or entering depreciati nsaction affecting trucks, ignoring income tax col erations. (Enter credit, understated and decrease es using eith uri preceding the -45 parenth (45).) Per Cornudny Books As Adjusted Net Retained overstat Trucks d Trucks d Trucks dr. Earnings Trucks d Earmings 1/15Balance 7115 M5 "Truck tinn 2/3 Sale k 2/31/Deprecia 2/3 purchase Tit 7/1/17 Disposal 2/31/Derneri tion 12131 Balances 12/21 Balance Prepare one compound journ ntry as of December 3 2018, for adjustment the Trucks d by you edule, Asceuwiwu.UDAL the bo 2018 ry is required, select "No Entry d enter 0 for the ts. Credit acnnunt titles lly when th entered. Do not indent manually