Question

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business 2016 Jan. 1 Paid $270,000 cash plus $10,800 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 $27,000 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $7,000 to enclose the cab and instal air conditioning in the loader to enable operations under harsher Dec. 31 Recorded annual straight-1ine depreciation on the loader. 2017 conditions. This increased the estimated salvage value of the loader by another $2,100 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-1ine depreciation on the loader Required Prepare journal entries to record these transactions and events

Answer 1

2016-Jan1
Equipment                                                 Dr	282,400
To Bank		282,400
(For purchase of loader 270000+10800+1600)
2016-Jan3
Equipment                                                 Dr	7,000
To Bank		7,000
(For installation cost)
2016-Dec 31
Depreciation                                           Dr	65,075
To Accumulated Depreciation		65,075
(For recording depreciation (282400+7000-27000-2100)/4
2017-Jan1
Equipment                                                 Dr	4,300
To Bank		4,300
(For improvement cost incurred)
Repairs                                                 Dr	1,075
To Bank		1,075
(For repair cost incurred)
2017-Dec 31
Depreciation                                           Dr	39,045
To Accumulated Depreciation		39,045
(For recording depreciation
Original cost	282,400
Installation cost	7,000
Total cost	289,400
less first year depreciation	(65,075)
WDV	224,325
Less salvage value	(29,100)
Depreciable value	195,225
Estimated useful life (3 out of original 4 years left +additional 2 years)	5
Annual depreciation	39,045