Question

Great Adventures Problem AP7-1

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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 $12,800. They expect to use the Suburban for five years and then sell the vehicle for $4,900. The following expenditures related to the vehicle were also made on July 1, 2022:

• The company pays $2,000 to GEICO for a one-year insurance policy.
• The company spends an extra $3,800 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides.
• An additional $2,200 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 $800 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.) View transaction list Journal entry worksheet Record the expenditures related to the new vehicle. Note: Enter debits before credits. General Journal Debit Credit Date Jul 01, 2022 Record entry Clear entry View general journal

Answer 1

Journal entries:
Record the expenditures related to the new vehicle:
Date	Accounts Title	Debit $	Credit $
1-Jul-22	Vehicle	12800
	Cash		12800
	(purchase of vehicles)
1-Jul-22	Pre-paid Insuance	2000
	Cash		2000
	(vehicle insurance taken up)
1-Jul-22	Vehicle	3800
	Cash		3800
	(expenditure on vehicle)
1-Jul-22	Vehicle	2200
	Cash		2200
	(addition to the vehicle)
22-Oct-22	Repair and Maintenance expense	800
	Cash		800
	(maintenance charges paid for vehicle)
DEPRECIATION SCHEDULE: yearly dep. = (18800-4900)/5 = 2780
Year	Dep. Exp.	Acc Dep	Book Value
1-Jul-22			18800
31-Dec-22	1390	1390	17410
2023	2780	4170	14630
2024	2780	6950	11850
2025	2780	9730	9070
2026	2780	12510	6290
30-Jun-27	1390	13900	4900
Record the depreciation expense for the vehicle:
31-Dec-22	Depreciation exp.	1390
	Acc. Dep. - Vehicle		1390
	(recording the depreciation for 6 months)
Recording the expiration of prepaid insurance :
31-Dec-22	Insurance expense	1000
	Prepaid insurance		1000
	(recording expired insurance for 6 months)