Question

(4) Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business.

2016

Jan.		1		Paid $282,000 cash plus $11,280 in sales tax and $1,900 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $28,200 salvage value. Loader costs are recorded in the Equipment account.
Jan.		3		Paid $5,000 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 annual straight-line depreciation on the loader.

2017

Jan.		1		Paid $5,000 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.
Feb.		17		Paid $1,250 to repair the loader after the operator backed it into a tree.
Dec.		31		Recorded annual straight-line depreciation on the loader.

Required:

A) Paid $282,000 cash plus $11,280 in sales tax and $1,900 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $28,200 salvage value. Loader costs are recorded in the Equipment account.

B) Paid $5,000 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.

C) Recorded annual straight-line depreciation on the loader.

D) Paid $5,000 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

E) Paid $1,250 to repair the loader after the operator backed it into a tree.

F) Recorded annual straight-line depreciation on the loader.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Date	Account	Debit	Credit
Jan 1 2016	Equipment	$ 295,180
	Cash		$ 295,180
	(282000+11280+1900)
Jan 3 2016	Equipment	$      5,000
	Cash		$      5,000
Dec 31 2016	Depreciation Expenses	$   67,620
	Accumulated Depreciation		$   67,620
	(295180+5000-28200-1500)/4
Jan 1 2017	Equipment	$      5,000
	Cash		$      5,000
Feb 17 2017	Repair Expense	$      1,250
	Cash		$      1,250
Dec 31 2017	Depreciation Expenses	$   41,572
	Accumulated Depreciation		$   41,572
	Working:
	Equipment Cost	$ 305,180
	Less: Salvage Value	$   29,700
	Less: Accumulated Dep till 2016	$   67,620
	Depreciable Value	$ 207,860
	Year 4 Year-1 Year gone+2 Year increase	5 Year
	Depreciation fro 2017 207860/5	$   41,572