Problem:
A truck was acquired on July 1, 2004 at a cost of $270,000. The truck had a six-year useful life and an estimated salvage value of $30,000. The straight-line method of depreciation was used.
On January 1, 2007, the truck was overhauled at a cost of $25,000, which extended the useful life of the truck for an additional two years beyond that originally estimated (salvage value is still estimated at $30,000). In computing depreciation for annual adjustment purposes, expense is calculated for each month the asset is owned.
Prepare the appropriate entries for January 1, 2004 and December 31, 2007.