On January 2, 2007, a company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line method of depreciation was used. Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1, 2011, under each of the following assumptions:
a. The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000. This transaction has commercial substance.
b. The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000. This transaction lacks commercial substance.

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The Answer of On January 2, 2007, a company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line method of depreciation was used. Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1, 2011, under each of the following assumptions:
a. The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000. This transaction has commercial substance.
b. The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000. This transaction lacks commercial substance.

On January 2, 2007, a Company Purchased a Delivery Truck