Response to the following problem:
St. Laurent Limited purchased a truck for cash on January 1, 2016. The company's fiscal year-end is December 31. The company uses the ½ year rule to calculate depreciation in the year of acquisition and disposal. The following details apply:
Cost $10,500
Useful life 5 years
Residual value $500
Depreciation method Double-declining balance
On March 1, 2017, the company paid $3,500 for gas and oil, a tune-up, new tires, and a battery. It also paid $4,000 to install a lift on the back of the truck. The latter amount is material.
Required:
1. Prepare journal entries to record
a. the purchase of the truck
b. depreciation for 2016
c. the 2017 expenditures relating to the truck d. depreciation for 2017.
2. Prepare the journal entries to record the sale of the truck on March 3, 2018 for $8,000 cash, including 2018 depreciation expense.