Question

Clarion Co. completed the following transactions and events involving the purchase and operation of equipment in its business.

2016

Jan.

1

Paid $300,000 cash plus $30,000 in sales tax and $12,500 in transportation (FOB shipping point) for a new loader, which is estimated to have a four-year life and a $25,500 salvage value. Loader costs are recorded in the Equipment account.

Jan.

3

Paid $25,000 to enclose the cab and install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,500.

Dec.

31

Recorded double-declining balance depreciation on the loader.

2017

Jan.

1

Paid $40,500 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

Feb.

17

Paid $1,000 to repair the loader after the operator backed it into a tree.

Dec.

31

Recorded double-declining balance depreciation on the loader.

Dec.

31

Sold the loader for $250,000 cash.

Answer 1

Date	Account Titles	Debit	Credit
1/1/2016	Equipment	$             342,500
	Cash		$           342,500
1/3/2016	Equipment	$                25,000
	Cash		$             25,000
12/31/2016	Depreciation Expense	$             183,750		=(342500+25000)*2/4
	Accumulated Depreciation		$           183,750
1/1/2017	Equipment	$                40,500
	Cash		$             40,500
2/17/2017	Repairs Expense	$                  1,000
	Cash		$               1,000
12/31/2017	Depreciation Expense	$                89,700		=(183750+40500)*2/5
	Accumulated Depreciation		$             89,700
12/31/2017	Cash	$             250,000
	Accumulated Depreciation - Equipment	$             273,450
	Equipment		$           408,000
	Gain on Sale of Equipment		$           115,450