Question

In: Accounting

Harry Rubenstein operates a private taxi business that provides personal transport services to passengers in the...

Harry Rubenstein operates a private taxi business that provides personal transport services to passengers in the Mornington Peninsula region of Victoria. The following transactions relate to the purchase of a new motor vehicle by the business for use as a private taxi. The business is registered for GST and the GST rate is 10%.

1 July 2015

On 1 July 2015, the business purchased a new motor vehicle. The motor vehicle had a recommended retail price of $55,000 (including GST), but after careful negotiation, it was purchased for $49,500 (including GST). The business also paid stamp duty of $1,000 (GST exempt) and $1,500 (plus GST) to paint the company’s logo on the motor vehicle. In addition, the business also installed a meter device on the front dashboard of the motor vehicle at a cost of $550 (including GST).

The motor vehicle was purchased on credit, but the painting and meter installation costs as well as the stamp duty were all paid in cash.

The motor vehicle is depreciated using the straight-line depreciation method and Harry Rubenstein estimates the motor vehicle to have a useful life of 7 years with a residual value of $6,000.

15 Mar 2018

1 July 2018

1 July 2020

Regular service of the motor vehicle was performed at a cost of $800 (plus GST).

The motor vehicle was overhauled at a cost of $9,900 (including

GST) after which its useful life is extended by 2 more years. The

residual value remains unchanged.

The motor vehicle was sold for $30,000 (plus GST).

REQUIRED:

(a) Prepare the journal entry to record the purchase of the motor vehicle on 1 July 2015.

(b) Prepare the journal entry to record the service expense on 15 March 2018.

(c) Prepare the journal entries to record the overhaul of the motor vehicle on 1 July 2018.

(d) Prepare the journal entry to record the sale of the motor vehicle on 1 July 2020.

Solutions

Expert Solution

Hey learner! if you have any doubt regarding this answer, feel free to ask me.

Following are the journal entries for the transactions related to motor vehicle.

ekkarill92 answered 1 year ago
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