Question

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business. 2016 Jan. 1 Paid $286,000 cash plus $11,440 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 $28,600 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $6,000 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 $1,800. Dec. 31 Recorded annual straight-line depreciation on the loader. 2017 Jan. 1 Paid $4,300 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years. Feb. 17 Paid $1,075 to repair the loader after the operator backed it into a tree. Dec. 31 Recorded annual straight-line depreciation on the loader. Required: Prepare journal entries to record these transactions and events.

Answer 1

Champion Contractor - Record - Depreciation
Date	Account Titles and Explanation	Debit	Credit
1/1/2016	Equipment	$299,340
	Cash (286000+11440+1900)		$299,340
	To record costs paid for equipment
3/1/2016	Equipment	$6,000
	Cash		$6,000
	To record air conditioner cost
31/12/2016	Depreciation expense (299340+6000-28600-1800)/4	$68,735
	Accumulated Depreciation - Equipment		$68,735
	To record annual depreciation Expense
1/1/2017	Equipment	$4,300
	Cash		$4,300
	To record Expense incurred for overhauling the equipment
17-02-2017	Repairs expense	$1,075
	cash		$1,075
	To record Expnse incurred for repair to equipment
31-12-2017	Depreciation expense (299340+6000-28600-1800+4300-68735)/6	$35,084
	Accumulated Depreciation - Equipment		$35,084
	To record annual depreciation Expense