Question

In: Accounting

Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....

Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2022:

  • The company pays $1,800 to GEICO for a one-year insurance policy.
  • The company spends an extra $3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides.
  • An additional $2,000 is spent on a deluxe roof rack and a trailer hitch.

The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. In addition, on October 22, 2022, the company pays $400 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter.

1

  • Record the expenditures related to the vehicle on July 1, 2022. Note: The capitalized cost of the vehicle is recorded in the Equipment account.

  • 2

    Record the expenditure related to vehicle maintenance on October 22, 2022.

  • 3

    Record the depreciation for vehicle purchased. Use straight-line depreciation.

  • 4

    Record the expiration of prepaid insurance.

  • 5

    Record the closing entry for revenue accounts.

  • 6

    Record the closing entry for expense accounts.

Solutions

Expert Solution

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!
Great Adventures
Workings for capitalized cost of the vehicle Note
Purchase cost of Suburban     12,000.00
Add: Cost of repainting       3,000.00
Add: Cost of roof and trailer       2,000.00
Total Cost     17,000.00 A
Less: Residual Value       4,500.00 B
Depreciable Cost     12,500.00 C=A-B
Life (Years)               5.00 D
Annual Depreciation       2,500.00 E=C/D
Depreciation for 6 months (July to December)       1,250.00 F=E/12*6
Insurance cost will not be capitalized. It will treated as expense.
Insurance cost       1,800.00 G
Period (months)             12.00 H
Expense for 6 months (July to December)          900.00 I=G/H*6
Maintenance cost will not be capitalized. It will treated as expense.
Date Journal entries Debit $ Credit $
1-Jul Equipment     17,000.00
Cash 17,000.00
1-Jul Prepaid Insurance       1,800.00
Cash     1,800.00
22-Oct Repairs          400.00
Cash        400.00
31-Dec Depreciation Expense       1,250.00
Accumulated Depreciation     1,250.00
31-Dec Insurance Expense          900.00
Prepaid Insurance        900.00
31-Dec There is no revenue account so no entry.
31-Dec Income Summary       2,550.00
Repairs        400.00
Depreciation Expense     1,250.00
Insurance Expense        900.00
(Closing entry for expense accounts)

Related Solutions

Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban. The cost of the Suburban is $8,800. The vehicle is purchased in late June and will be put into use on July 1, 2019. Annual insurance from GEICO runs $1,400 per year. The paint is starting to fade, so they spend an extra $2,200 to repaint the vehicle, placing the Great Adventures logo on the front hood,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban. The cost of the Suburban is $8,800. The vehicle is purchased in late June and will be put into use on July 1, 2019. Annual insurance from GEICO runs $1,400 per year. The paint is starting to fade, so they spend an extra $2,200 to repaint the vehicle, placing the Great Adventures logo on the front hood,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $15,000. They expect to use the Suburban for five years and then sell the vehicle for $6,000. The following expenditures related to the vehicle were also made on July 1, 2022: The company pays $2,550 to GEICO for a one-year insurance policy. The company spends an extra $6,000 to repaint the vehicle,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban. The cost of the Suburban is $12,000. The vehicle is purchased in late June and will be put into use on July 1, 2019. Annual insurance from GEICO runs $1,800 per year. The paint is starting to fade, so they spend an extra $3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2022: The company pays $1,800 to GEICO for a one-year insurance policy. The company spends an extra $3,000 to repaint the vehicle,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2022: The company pays $1,800 to GEICO for a one-year insurance policy. The company spends an extra $3,000 to repaint the vehicle,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban. The cost of the Suburban is $10,000. The vehicle is purchased in late June and will be put into use on July 1, 2019. Annual insurance from GEICO runs $1,550 per year. The paint is starting to fade, so they spend an extra $2,500 to repaint the vehicle, placing the Great Adventures logo on the front hood,...
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $15,400. They expect to use the Suburban for five years and then sell the vehicle for $6,200. The following expenditures related to the vehicle were also made on July 1, 2022: The company pays $2,650 to GEICO for a one-year insurance policy. The company spends an extra $6,400 to repaint the vehicle,...
Tony and Suzie see the need for a rugged all-terrain vehicle totransport participants and supplies....
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $15,600. They expect to use the Suburban for five years and then sell the vehicle for $6,300. The following expenditures related to the vehicle were also made on July 1, 2022:The company pays $2,700 to GEICO for a one-year insurance policy.The company spends an extra $6,600 to repaint the vehicle, placing the...
[The following information applies to the questions displayed below.] Tony and Suzie see the need for...
[The following information applies to the questions displayed below.] Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $13,400. They expect to use the Suburban for five years and then sell the vehicle for $5,200. The following expenditures related to the vehicle were also made on July 1, 2022: The company pays $2,150 to GEICO for a one-year insurance policy. The...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT