Events related to the acquisition, use, and disposal of a tangible plant asset: straight-line depreciation
City Taxi Service purchased a new auto to use as a taxi on January 1, 2016, for $36,000. In addition, City paid sales tax and titles fees of $1,200 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $4,000.
Required
a. Using the straight-lined method, compute the depreciation expense for 2016 and 2017.
b. Prepare the general journal entry to record the 2016 depreciation.
c. Assume that the taxi was sold on January 1, 2018, for $22,000. Prepare the journal entry for the sale in 2018.
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