Basin Corporation had the following transactions related to its delivery truck: Year 1
Jan. 5 Purchased for $16,600 cash a new truck with an estimated useful life of four years and a salvage value of $2,600.
Feb. 20 Installed a new set of side-view mirrors at a cost of $70 cash.
June 9 Paid $290 for an engine tune-up, wheel balancing, and a periodic chassis lubrication.
Aug. 2 Paid a $260 repair bill for the uninsured portion of damages to the truck caused by Basin's own driver.
Dec. 31 Recorded depreciation on the truck for the year.

Year 2
May 1 Installed a set of parts bins in the truck at a cost of $1,000 cash. This expenditure was not expected to increase the salvage value of the truck.
Dec. 31 Recorded depreciation on the truck for the year.

Year 3
Dec. 31 Recorded depreciation on the truck for the year.

Basinâs depreciation policies include (1) using straight?line depreciation, (2) recording depreciation to the nearest whole month, and (3) expensing all truck expenditures of $75 or less.

Required:
Prepare journal entries to record these transactions and adjustments.

Year 1 depreciation expense = $3,518

Year 2 depreciation expense = $3,767

Year 3 depreciation expense = $3,892

See the journal entries and the adjustments below.

Explanation:

For Year 1:

The journal entries will as follows:

Date       General Journal                            Debit ($)         Credit ($)    

Jan. 5      Delivery truck                                 16,600

               Cash                                                                         16,600

               (To record purchase of delivery truck.)                                     

Feb. 20    Delivery truck                                       70

                Cash                                                                              70

                (To installation of a new set of side-view mirrors.)                  

June 9     Trucks repairs & maint. exp.              290

                Cash                                                                            290

               (To record cost of engine tune-up, wheel bal., & lubrication.)    

Aug. 2     Trucks repairs & maint. exp.               260

                Cash                                                                             260

                (To record truck repair expense.)                                                

Dec. 31     Dep. exp - Delivery Truck (w.1)          3,518

                Acc. dep. exp - Delivery Truck                                   3,518

                (To record depreciation on the truck for the year.)                    

For Year 2:

The journal entries will as follows:

Date       General Journal                            Debit ($)         Credit ($)    

May 1       Delivery Tuck                                   1,000

               Cash                                                                          1,000

               (To record the cost of installation of a set of parts bins.)      

Dec. 31     Dep. exp - Delivery Truck (w.4)      3,767

                Acc. dep. exp - Delivery Truck                                3,767

                (To record depreciation on the truck for the year.)                  

For Year 3:

The journal entries will as follows:

Date       General Journal                            Debit ($)         Credit ($)    

Dec. 31     Dep. exp - Delivery Truck (w.5)      3,892

                Acc. dep. exp - Delivery Truck                                3,892

                (To record depreciation on the truck for the year.)                  

Workings:

Under Year 1:

w.1: Year 1 depreciation expense = (Cost of delivery tuck + Cost of installation of a new set of side-view mirrors - Salvage value) / Estimated useful life = ($16,600 + $70 - $2,600) / 4 = $3,518

Under Year 2:

w.2: Depreciation expense from Jan 1 to April 30 of Year 2 = ((Cost of delivery tuck + Cost of installation of a new set of side-view mirrors - Salvage value) / Estimated useful life) * (Number of months from Jan 1 to April 30 / Number of months in a year) = (($16,600 + $70 - $2,600) / 4) * (4 / 12) = $1,173

w.3: Depreciation expense from May 1 to Dec 31 of Year 2 = ((Cost of delivery tuck + Cost of installation of a new set of side-view mirrors + Cost of installation of a set of parts bins in the truck – Year 1 depreciation expense – Depreciation expense from Jan 1 to April 30 of Year 2 - Salvage value) / (Estimated useful months – Number of months from Jan 5 of Year 2 to April 30 of Year 2) * Number of months from May 1 to Dec 31 of Year 2 = (($16,600 + $70 + $1,000 - $3,518 – $1,173 - $2,600) / ((4 * 12) - 16) * 8 = $2,595

w.4: Year 2 depreciation expense = Depreciation expense from Jan 1 to April 30 + Depreciation expense from May 1 to Dec 31 = $1,173 + $2,595 = $3,767

Under Year 3:

W.5: Year 3 depreciation expense = ((Cost of delivery tuck + Cost of installation of a new set of side-view mirrors + Cost of installation of a set of parts bins in the truck – Year 1 depreciation expense – Depreciation expense from Jan 1 to April 30 of Year 2 - Salvage value) / (Estimated useful months – Number of months from Jan 5 of Year 2 to April 30 of Year 2) * Number of months from Jan. 1 to Dec 31 of Year 3 = (($16,600 + $70 + $1,000 - $3,518 – $1,173 - $2,600) / ((4 * 12) - 16) * 12 = $3,892

answer; encouraging the development of innovations by firms attempting to break a monopoly; (creative destruction)

turnover

the amount of money taken by a business in a particular period.