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Project 1.4 Topic: Long-Term Assets Part 1 On 1/1/20X1, Illini Company acquires one truck and one car for a lump sum of $60,000. The fair

Project 1.4 Topic: Long-Term Assets Part 1

On 1/1/20X1, Illini Company acquires one truck and one car for a lump sum of $60,000. The fair values of the truck and the car are $50,000 and $30,000, respectively. The expected useful life of the truck and car is 10 years, and the expected residual values for the truck and car are $2,000 and $1,000, respectively. Illini accounts for the truck and car using the straight line method.

On 1/1/20X2, Illini trades in the car plus $10,000 cash for a newer one. The fair value of the newer car is $30,000. The expected useful life of the newer car is 10 years, and its expected residual value is $1,000. Illini accounts for the new car using the straight line method.

Please refer to the instructions and the table in this question. Enter the correct journal entry for part [A].

The Balance Sheet of the Illini as of 12/31/20X0:

Illini Company, Inc.

Balance Sheet

as of 12/31/20X0

Assets

Current Assets:

Cash

$1,500,000

Accounts receivable, net

18,000

Inventory

50,000

Total current assets

1,568,000

Equipment

90,000

Goodwill

20,000

Total assets

$1,678,000

Liabilities and shareholders' equity

Shareholders' equity:

Common stock, 20,000 shares outstanding, $1 par

$20,000

Additional paid-in capital

280,000

Retained earnings

1,378,000

Total shareholders' equity

1,678,000

Total liabilities and shareholders' equity

$1,678,000

  • Note that all additional paid-in capital (APIC) sub accounts (e.g., APIC-options and APIC-treasury stock), if any, are tracked in the Additional paid-in capital account on the Balance Sheet.

Project 1.4 Part 1 Journal Entries

Date Account Name (Debit) Account Name (Credit) Debit Credit
1/1/20X1 Truck [A]
Car [B]
Cash [C]
12/31/20X1 Depreciation expense [D]
Accumulated depreciation-Truck [E]
Accumulated depreciation-Car [F]
1/1/20X2 Car-New [G]
Accumulated depreciation-Car [H]
Loss [I]
Cash [J]
Car [K]
12/31/20X2 Depreciation expense [L]
Accumulated depreciation-Truck [M]
Accumulated depreciation-Car-New [N]

enter answers for journal items ([A] to [N]

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