The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. 2014 Jan. 4. Purchased a used delivery truck for $28,000, paying cash. Nov. 2. Paid garage $675 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $5,000 for the truck. 2015 Jan. 6. Purchased a new truck for $48,000, paying cash. Apr. 1. Sold the used truck for $15,000. (Record depreciation to date in 2015 for the truck.) June 11. Paid garage $450 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $9,000 and an estimated life of five years. 2016 July 1. Purchased a new truck for $54,000, paying cash. Oct. 2. Sold the truck purchased January 6, 2015, for $16,750. (Record depreciation to date for 2016 for the truck.) Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $12,000 and an estimated useful life of eight years. Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles. Be sure to include the YEAR in the date for the FIRST transaction on each page.

Please see the Journal entries of Legacy Furniture Co. during a three year period, below:

Explanation:

(1)

Jan. 4, 2014

Debit: Delivery Truck $28,000

Credit: Cash $28,000

To record purchase of Delivery Truck.

(2)

Nov. 2, 2014

Debit: Miscellaneous Repairs Expense $675

Credit: Cash $675

To record payment of miscellaneous repairs expense.

(3)

Dec. 31, 2014

Debit: Depreciation Expense $14,000

Credit: Accumulated Depreciation $14,000

To Record double-declining depreciation expense.

Depreciation Expense Calculation:

Depreciation Rate = 1 / Estimated Useful Life

Decipherable Rate = 1 / 4

Decipherable Rate = 0.25

or

Decipherable Rate = 25%

Double Declining Decipherable Rate = 2 x 25%

Double Declining Decipherable Rate = 50%

Depreciation Expense = Book Value x Double Declining Decipherable Rate

Depreciation Expense = $28,000 x 50%

Depreciation Expense = $14,000

(4)

Jan. 6, 2015

Debit: Delivery Truck $48,000

Credit: Cash $48,000

To record purchase of new Delivery Truck.

(5)

Apr. 1, 2015

Debit: Cash $15,000

Debit: Accumulated Depreciation $15,750

Credit: Delivery Truck $28,000

Credit: Gain on Sale $2,750

To record Sale of Used Truck.

Apr. 1, 2015

Debit: Depreciation Expense $1,750

Credit: Accumulated Depreciation $1,750

To Record Depreciation Expense of Used Truck.

Accumulated Depreciation & Proceed from Sale Calculation:

Year 1:

Depreciation Expense = $14,000

Year 2 New Book Value = $28,000 - $14,000

Year 2 New Book Value = $14,000

3 Months in Year 2:

Pro Rated Depreciation Expense for Used Truck

= New Book Value x Rate x No. of months used/Total No. of months in year

= $14,000 x 50% x 3/12

= $1,750

Accumulated Depreciation = $14,000 + $1,750

Accumulated Depreciation = $15,750

Net Value of Used Truck = Book Value - Accumulated Depreciation

Net Value of Used Truck = $28,000 - $15,750

Net Value of Used Truck = $12,250

Gain on Sale of Used Truck = Sale Price - Net Value

Gain on Sale of Used Truck = $15,000 - $12,250

Gain on Sale of Used Truck = $2,750

(6)

June 11, 2015

Debit: Miscellaneous Repairs Expense $450

Credit: Cash $450

To record payment of miscellaneous repairs expense.

(7)

Dec. 31, 2015

Debit: Depreciation Expense $19,200

Credit: Accumulated Depreciation $19,200

To Record double-declining depreciation expense.

Depreciation Expense Calculation:

Depreciation Rate = 1 / Estimated Useful Life

Decipherable Rate = 1 / 5

Decipherable Rate = 0.20

or

Decipherable Rate = 20%

DDR = Double Declining Rate = 2 x 20%

DDR = Double Declining Rate = 40%

Depreciation Expense = Decipherable Asset Cost x Decipherable Rate

Depreciation Expense = $48,000 x 40%

Depreciation Expense = $19,200

(8)

July 1,2016

Debit: Delivery Truck $54,000

Credit: Cash $54,000

To record purchase of new Delivery Truck.

(9)

Oct. 2, 2016

Debit: Cash $16,750

Debit: Loss on Sale $3,410

Debit: Accumulated Depreciation $27,840

Credit: Delivery Truck $48,000

To record Sale of New Truck purchased in 2015.

Oct. 2, 2016

Debit: Depreciation Expense $8,640

Credit: Accumulated Depreciation $8,640

To Record Depreciation Expense of New Truck purchased in 2015.

Accumulated Depreciation & Proceed from Sale Calculation:

Year 1:

Depreciation Expense = $19,200

Year 2 New Book Value = $48,000 - $19,200

Year 2 New Book Value = $28,800

9 Months in Year 2:

Pro Rated Depreciation Expense for Used Truck

= New Book Value x DDR x No. of months used / Total No. of months in year

= $28,800 x 40% x 9 / 12

= $8,640

Accumulated Depreciation = $19,200 + $8,640

Accumulated Depreciation = $27,840

Net Value of Used Truck = Book Value - Accumulated Depreciation

Net Value of Used Truck = $48,000 - $27,840

Net Value of Used Truck = $20,160

(Loss) on Sale of Used Truck = Sale Price - Net Value

(Loss) on Sale of Used Truck = $16,750 - $20,160

(Loss) on Sale of Used Truck = ($3,410)

(10)

Dec. 31, 2016

Debit: Depreciation Expense $13,500

Credit: Accumulated Depreciation $13,500

To Record double-declining depreciation expense.

Depreciation Expense Calculation:

Depreciation Rate = 1 / Estimated Useful Life

Decipherable Rate = 1 / 8

Decipherable Rate = 0.125

or

Decipherable Rate = 12.50%

DDR = Double Declining Rate = 2 x 12.50%

DDR = Double Declining Rate = 25%

Depreciation Expense = Book Vale x DDR

Depreciation Expense = $54,000 x 25%

Depreciation Expense = $13,500

New Book Value = $54,000 - $13,500

New Book Value = $40,500

answer; erp systems;

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