The Martin Ready-Mix Company purchases a new 10-Yard delivery truck for $138,000. The following information is also available.
- Sales Taxes 9,500
- Transit Insurance 500
- Preparation Costs 1,000
- Fleet Liability Insurance 750
- Painting & Lettering 500
- Weekly Driver's Wages 100
- Prep Team Wages 500
The estimated life of the truck is 5 years (from 1/1/XX), with a salvage value of $10,000. The truck was purchased for cash.
1. Calculate the cost of the truck that should be capitalized.
2. Summarize the entry to the accounting equation (by account title) and give the journal entry to record the capitalization of the truck.Assets = Liabilities + Equity
3.Using the straight-line depreciation method, calculate the depreciation expense that would be recorded for each year of the truck's life.
4. Assume that half way through the fourth year the truck is sold for $60,000. Make the appropriate entry to the accounting equation (by account title) and give the journal entry to record the sale of the truck.