Create a complete depreciation schedule for the truck

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Reference no: EM132770368

James has been running a delivery company for the last 10 years. He comes to ask you about several issues affecting his business:

James considered necessary to renew part of the assets of the company, and in particular purchase a new fleet of trucks so as to increase the capacity of the company.
On 28th of March 2020 he purchased a new truck with an estimated useful life of 8 years for a total price of €165,000 and a residual value of € 5,000
On 25 of September James decides to purchase a building where to set up his office. In order to finance the purchase that will take place on 1st of October, James will take a 20 year Mortgage for € 900,000, with a 5% interest rate. James will have to refund the mortgage through monthly installment payments of € 4.000.
James also plans to sell his professional SUV vehicle. He received an offer from an interested company who would purchase it for €29.000. The transaction would take place on December 31st, 2020. Said vehicle was purchased on 1st of January 2016 for €85.000.
The accountant of James's company considered for depreciation purposes that this vehicle had a useful life of 6 years and a residual value of €5.000. The accountant used the double declining balance method.

Problem 1. Create a complete depreciation schedule for the truck using straight-line depreciation method. You will apply the half-year convention. Explain your calculation and how the half year convention will affect the depreciation expense of the period.

Problem 2. Create a complete depreciation schedule for the truck using the double declining balance method for depreciation switching to straight line for the two last years.

Problem 3. Calculate the amount of the gain or loss obtained in the sale of the vehicle, and prepare the journal entries.

Problem 4. Prepare the amortization table of the mortgage for the months of October, November and December 2020. Calculate the interest expense for the whole year 2020 and the total balance of the liability to be registered in the balance sheet of the company at 31 of December 2020.

Problem 5. Prepare the journal entries to record the installment payments.

Reference no: EM132770368

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