Answer:
Year 1 depreciation expense = $3,518
Year 2 depreciation expense = $3,767
Year 3 depreciation expense = $3,892
See the journal entries and the adjustments below.
Explanation:
<u>For Year 1:</u>
The journal entries will as follows:
<u>Date General Journal Debit ($) Credit ($) </u>
Jan. 5 Delivery truck 16,600
Cash 16,600
<em><u> (To record purchase of delivery truck.) </u></em>
Feb. 20 Delivery truck 70
Cash 70
<u><em> (To installation of a new set of side-view mirrors.) </em></u>
June 9 Trucks repairs & maint. exp. 290
Cash 290
<u><em> (To record cost of engine tune-up, wheel bal., & lubrication.) </em></u>
Aug. 2 Trucks repairs & maint. exp. 260
Cash 260
<u><em> (To record truck repair expense.) </em></u>
Dec. 31 Dep. exp - Delivery Truck (w.1) 3,518
Acc. dep. exp - Delivery Truck 3,518
<u><em> (To record depreciation on the truck for the year.) </em></u>
<u>For Year 2:</u>
The journal entries will as follows:
<u>Date General Journal Debit ($) Credit ($) </u>
May 1 Delivery Tuck 1,000
Cash 1,000
<u><em> (To record the cost of installation of a set of parts bins.) </em></u>
Dec. 31 Dep. exp - Delivery Truck (w.4) 3,767
Acc. dep. exp - Delivery Truck 3,767
<u><em> (To record depreciation on the truck for the year.) </em></u>
<u>For Year 3:</u>
The journal entries will as follows:
<u>Date General Journal Debit ($) Credit ($) </u>
Dec. 31 Dep. exp - Delivery Truck (w.5) 3,892
Acc. dep. exp - Delivery Truck 3,892
<u><em> (To record depreciation on the truck for the year.) </em></u>
<u>Workings:</u>
<u>Under Year 1:</u>
w.1: Year 1 depreciation expense = (Cost of delivery tuck + Cost of installation of a new set of side-view mirrors - Salvage value) / Estimated useful life = ($16,600 + $70 - $2,600) / 4 = $3,518
<u>Under Year 2:</u>
w.2: Depreciation expense from Jan 1 to April 30 of Year 2 = ((Cost of delivery tuck + Cost of installation of a new set of side-view mirrors - Salvage value) / Estimated useful life) * (Number of months from Jan 1 to April 30 / Number of months in a year) = (($16,600 + $70 - $2,600) / 4) * (4 / 12) = $1,173
w.3: Depreciation expense from May 1 to Dec 31 of Year 2 = ((Cost of delivery tuck + Cost of installation of a new set of side-view mirrors + Cost of installation of a set of parts bins in the truck – Year 1 depreciation expense – Depreciation expense from Jan 1 to April 30 of Year 2 - Salvage value) / (Estimated useful months – Number of months from Jan 5 of Year 2 to April 30 of Year 2) * Number of months from May 1 to Dec 31 of Year 2 = (($16,600 + $70 + $1,000 - $3,518 – $1,173 - $2,600) / ((4 * 12) - 16) * 8 = $2,595
w.4: Year 2 depreciation expense = Depreciation expense from Jan 1 to April 30 + Depreciation expense from May 1 to Dec 31 = $1,173 + $2,595 = $3,767
<u>Under Year 3:</u>
W.5: Year 3 depreciation expense = ((Cost of delivery tuck + Cost of installation of a new set of side-view mirrors + Cost of installation of a set of parts bins in the truck – Year 1 depreciation expense – Depreciation expense from Jan 1 to April 30 of Year 2 - Salvage value) / (Estimated useful months – Number of months from Jan 5 of Year 2 to April 30 of Year 2) * Number of months from Jan. 1 to Dec 31 of Year 3 = (($16,600 + $70 + $1,000 - $3,518 – $1,173 - $2,600) / ((4 * 12) - 16) * 12 = $3,892