On July 1, 2000, Philip Ward bought a used pickup truck at a cost of $\$ 5,300$ for use in his business. On the same day, Ward had the truck painted blue and white (his company's colors) at a cost of $\$ 800$. Mr. Ward estimates the life of the truck to be three years or 40,000 miles. He further estimates that the truck will have a $\$ 450$ scrap value at the end of its life, but that it will also cost him $\$ 50$ to transfer the truck to the junkyard.

Required:

1. Record the following journal entries:

a. July 1, 2000: Paid all bills pertaining to the truck. (No previous entries have been recorded concerning these bills.)

b. Dec. 31, 2000: The depreciation expense for the year, using the straight-line method.

c. Dec. 31, 2001: The depreciation expense for 2001, again using the straightline method.

d. Jan. 2, 2002: Sold the truck for $\$ 2,600$ cash 2. What would the depreciation expense for 2000 have been if the truck had been driven 8,000 miles and the units-of-production method of depreciation had been used?

3. Interpretive Question: In part 1d, there is a loss of $\$ 650$. Why did this loss occur?