Question

Problem 10-4A Computing and revising depreciation; revenue and capital expenditures LO C1, C2, C3 Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business. 2016 Jan. 1 Paid $262,000 cash plus $10, 480 in sales tax and $1,600 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $26, 200 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $4,000 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 $1,200. 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

Anar: Date Journal entries particulars THE Debit credit DY Sam-| Equetipment Loader) Ale $ 274,080 $274,080 {$262.000 +*10,480 +$1,600] se o cash / Baulé Being Asset capitalised] Jang Equipment Cloader) Ale or $4,000 . $4,000 . To cash/Bank Being Installation inclke ding air condilion capitalized] Deagil Depreciation Ale or $62,670 TO Accumulated depreciation $62,670 [C$274,080 + $4,000 - $26,200 - $1,200)4 Being annual dopreciation charged] 2017 Equipment (loader) Ale or $4,300 Jani I $4,300 - To cash/Bank Being additional cost capitalised] Febil Repair Ale or $1,075 To cash/Bank $1,075 Being Repair expenses charged Dec-31 Depreciation ale - Dr $38,462 To accumulated Depreciation 1 $38 462 being Depreciation provided] working Notes" Calculation f Depreciation - carrying value at beginning of 2017: Cost - acculated deprecialiad : $274,080 +$ 4000-$62,670 - $ 215,410 Now Capitalized Cost = $215410° +$4,300 = $ 219,710 Remaining useful life - Hloriginal)-1(Expired 2016)+2 inereared in 5 years estimated) Depreciation for 2017 = (capitalised cost - Salvage value)/userful licke = ($ 219,710 – $27H00)5 :: Depreciation for 2017 = $38462 (2016) 100 - $62,670 = $ 219,710 - C$26200+$1,200]/5 years