Question

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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 company spends an extra $4,400 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides.
• An additional $2,350 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 $1,100 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter.

Required:

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. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

2. Record the expenditure related to vehicle maintenance on October 22, 2022. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

3. Prepare a depreciation schedule using the straight-line method.
  

3. Prepare a depreciation schedule using the straight-line method.
  

Answer 1

Part 1

No.	Date	Account titles and explanation	Debit	Credit
1	July 1, 2022	Equipment – vehicle	20150
		Cash		20150
2.	July 1, 2022	Prepaid insurance	2150
		Cash		2150

OR

Combine entry

No.	Date	Account titles and explanation	Debit	Credit
1	July 1, 2022	Equipment – vehicle	20150
		Prepaid insurance	2150
		Cash		22300

Purchase price	13400
Painting and new logo	4400
Deluxe roof rack and trailer hitch	2350
Total	$20150

Part 2

No.	Date	Account titles and explanation	Debit	Credit
1	October 22, 2022	Maintenance expense	1100
		Cash		1100

expenditure related to vehicle maintenance on October 22, 2022

$1100

Part 3

Great Adventures
	Calculation				End of Year Amounts
year	Allocation Base	x	Depreciation Rate	=	Depreciation Expense	Accumulated Depreciation	Book Value
1	8200		20%*1/2		820	820	12580
2	8200		20%		1640	2460	10940
3	8200		20%		1640	4100	9300
4	8200		20%		1640	5740	7660
5	8200		20%		1640	7380	6020
6	8200		20%*1/2		820	8200	5200
Total					8200

Allocation base = purchase price – salvage value = 13400-5200 = 8200

Deprecation rate = 1/useful life = 1/5 = 20%

Book value = purchase price – accumulated depreciation