Asset Overhaul
Swift Corporation Is an International Provider of Freight $\# 1 - 5$

question 45

Essay

Asset overhaul
Swift Corporation is an international provider of freight services that follows IFRS. Its fleet of vehicles includes a truck that is carried in its books as "VC1-016." This truck was purchased two years ago for $ 150,000 and has been depreciated on a straight-line basis. By December 31, 2020, its book value (carrying value) is $ 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. The associated costs of the overhauls are tracked in separate accounts.
At December 31, 2020, the balances for VC1-016 are as follows:
Overhauls $\# 1 - 5$ :
Accumulated Depreciation:.......................................... $\$ 0$
Overhaul \# 6:
Cost.............................................................................$20,000
Less accumulated depreciation:.................\underline{(16,400)}
Book value.............................................................$3,600

On January 1, 2021, 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, 2021, for $ 28,000 cash.
Because of a slowdown in the economy, the truck only operated for 21,000 km for the remainder of 2021.
Instructions
Prepare the appropriate journal entries for 2021 relating to the truck's overhaul.

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