Prepare the appropriate journal entries

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Reference no: EM13135541

Schmidt Corporation is an international provider of freight services that follows international GAAP. Its fleet of vehicles includes a truck that is carried in its books as "VC1-016". It was acquired two years ago at a cost of $150,000 and has since been depreciated on a straight-line basis. By December 31, 2010 it had a net book value of $97,000 As part of its commitment to safety and as required by its insurer, the company has a policy to overhaul its trucks after every 50,000 km's. The associated costs of the overhauls are tracked in separate accounts. At December 31, 2010 the balances for VC1-016 are as follows: Overhauls # 1 - 5: Accumulated Depreciation: $0 Overhaul # 6: Cost : $20,000 Less: Accumulated Depreciation: ($16,400) Net book value $3,600 On January 1, 2011, after the driver had reported problems with the truck's engine, a decision was made to do an early overhaul (i.e. 9,000 km prior to the next scheduled overhaul). The overhaul was completed on January 7, 2011 at a cost of $28,000. Because of a slowdown in the economy, the truck only operated for 21,000 km for the remainder of 2011. Instructions Prepare the appropriate journal entries for 2011 relating to the truck's overhaul.

Reference no: EM13135541

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