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Rod's Taxi Service purchased a new auto to use as a taxi on January 1, 2013, for $32,000. In addition, Rod's paid sales tax and title fees of $1,200 for the vehicle. The taxi is expected to have a five year life and a salvage value of $3,200.
Required:
a. Using the straight line method, compute the depreciation expense for 2013 and 2014.
b. Prepare the general journal entry to record the 2013 depreciation.
c. Assume that the taxi was sold on January 1, 2015, for $22,000. Prepare the journal entry for the sale of the taxi in 2015.
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