Zedel Delivery Services has a December 31, 2019 year end. On January 1, 2019 Zedel has a delivery van with a cost of $35,000 and accumulated depreciation of $12,000. The van was expected to have a residual value of $5,000 and a useful life of 5 years. Zedel uses straight-line depreciation. Zedel plans to replace its delivery van on April 1, 2019 and is considering two alternatives.

1.Zedel has been offered $20,000 cash by a friend for the old van. If Zedel accepts this offer, Zedel would then purchase a new van for $50,000 cash.

2.Trade in the old van for a new one. The new van has a cash price of $50,000. The van dealer will give a $17,000 trade-in allowance on the old van. The fair market value of the old van is $13,000.

a)Record the updated depreciation on the old van to April 1, 2019. (1 mark)

b)Record all required journal entries under each of the two alternatives. (10 marks)

c)Which alternative do you recommend and why? (2 marks)