Question

Required Information Great Adventures Problem AP7-1 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 $12,400. They expect to use the Suburban for five years and then sell the vehicle for $4,700. The following expenditures related to the vehicle were also made on July 1, 2022 • The company pays $1,900 to GEICO for a one-year insurance policy. • The company spends an extra $3.400 to repaint the vehicle, placing the Great Adventures logo on the front hood. back, and both sides. • An additional $2,100 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 $600 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter. Great Adventures Problem AP7-1 Part 1 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.) View transaction list View journal entry worksheet Debit Credit General Journal NO Date 17 000 Jul 01, 2022 Equipment Prepaid Insurance

Answer 1

Repairs Costs which increase the life of efficiency of an Equipment shall be capitalized by debiting to that Equipment account.

Normal routine repairs expenses which shall not increase life of fixed assets or efficiency of fixed assets shall be expense as repairs expense.

The Journal entries as follows

Journal Entries Date Account Title and Explaination Debit Post. Ref. Credit (S) (S) 1 D. 1,900.00 Prepaid Insurance Cash (To record One year inurance paid) $ 1,900.00 Equipment 3,400.00 Cash 3,400.00 (To record cash paid for painting, logos on vehicle) $ 2,100.00 Equipment Cash (To record cash paid for roof rack of vehicle) 2,100.00 600.00 Repairs and Maintenance Expense Cash (To record basic vehicle maintenance done) 600.00