Reference no: EM133132357
Question -
Part A - The AR Group bought a tractor on January 1, 2005 for $65,000. They use the declining balance depreciation method with a 30% rate.
Calculate the depreciation for the years ended December 31, 2005 and December 31, 2006.
1. Depreciation Expense: December 31, 2005
2. Depreciation Expense: December 31, 2006
PART B - Jacob Manufacturing purchased a new truck on April 1, 2005 for $30,000. The truck is expected to have a residual value of $2,000 and its useful life is anticipated to be seven years. The company uses the straight-line method of depreciation. Jacob Manufacturing has a December 31st year-end.
1. Calculate the depreciation expense for the first year (December 31, 2005).
2. Prepare the journal entry to record depreciation expense for the first year (Ignore account numbers.
3. Calculate the depreciation expense for the second year (December 31, 2006).
4. Calculate the net book value at December 31, 2006.
5. Calculate the gain or loss on the sale assuming the truck was sold on December 31, 2006 for $23,500.
6. Prepare the journal entry to record the sale of the truck on December 31, 2006 for $23,500.
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