Question

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 $12,600. They expect to use the Suburban for five years and then sell the vehicle for $4,800. The following expenditures related to the vehicle were also made on July 1, 2022: • The company pays $1.950 to GEICO for a one-year insurance policy. . The company spends an extra $3,600 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. • An additional $2,150 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 $700 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter.

Answer 1

Computation of total cost of Suburban and depreciation
Particular	Amount
Purchase cost	$12,600.00
Repair Cost	$3,600.00
Additional cost Incurred for fitting roof rack and a trailer hitch	$2,150.00
Total Amount to be capitalized	$18,350.00

Journal entry - Tony & Seuzie
Date	Account's tittle	Debit $	Credit $
31-12-2022	Depreciation Expense	$1,355.00
	Accumulated Depreciation-Suburban		$1,355.00
	((18350-4800)/5)*6/12
31-12-2022	Inurance Expense	$975.00
	Prepaid Insurance		$975.00
	(1950/2)