Group and Composite Depreciation The Cheadle Company purchased a fleet of 20 delivery trucks for $8,000 each on January 2, 2007. It decided to use composite depreciation on a straight line basis, and calculated the depreciation from the following schedule:
|
Year |
Number of Trucks to Be Retired at Year End |
Estimated Residual Value per Truck |
|
2008 |
2 |
$4,000 |
|
2009 |
6 |
4,000 |
|
2010 |
8 |
2,000 |
|
2011 |
4 |
— |
The company actually retired the trucks according to the following schedule (assume each truck was retired at the beginning of the year):
|
Year |
Number of Trucks Retired |
Total Proceeds from Retirements |
|
2008 |
1 |
$4,000 |
|
2009 |
3 |
11,000 |
|
2010 |
6 |
19,000 |
|
2011 |
5 |
6,000 |
|
2012 |
3 |
4,000 |
|
2013 |
2 |
1,000 |
Required
1. Prepare the journal entries necessary to record the preceding events.
2. Assume that the company expected all the trucks to last four years and be retired for $1,600 each. Using group depreciation, prepare journal entries for all six years, assuming the company retired the trucks as shown by the latter schedule.