Question

Year 1

Jan.		1		Paid $290,000 cash plus $11,600 in sales tax and $1,700 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $29,000 salvage value. Loader costs are recorded in the Equipment account.
Jan.		3		Paid $6,000 to 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.

Year 2

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 for minor repairs to the loader after the operator backed it into a tree.
Dec.		31		Recorded annual straight-line depreciation on the loader.

Journal entry worksheet < 1 2 3 4 Paid $1,075 for minor repairs to the loader after the operator backed it into a tree. Note: Enter debits before credits. Date General Journal Debit Credit Feb 17, Year 2

Answer 1

Answer -

Date	General journal	Debit ($)	Credit ($)
Jan. 1, Year 1	Equipment [$290000 + $11600 + $1700] Cash	303300 -	- 303300
Jan. 3, Year 1	Equipment Cash	6000 -	- 6000
Dec. 31, Year 1	Depreciation Expense--Equipment Accumulated Depreciation--Equipment [($303300 + $6000 - $29000 - $1800) / 4 years]	69625 -	- 69625
Jan. 1, Year 2	Equipment Cash	4300 -	- 4300
Feb. 17, Year 2	Repairs Expense--Equipment Cash	1075	- 1075
Dec. 31, Year 2	Depreciation Expense--Equipment [Refer working note - (1)] Accumulated Depreciation--Equipment	42635 -	- 42635

# Working Note - Depreciation Expense for Year 2 -

	Particulars	Explanation
I.	Total cost of Equipment	$303300 + $6000 + $4300	$313600
II.	Accumulated Depreciation	As on Dec. 31, Year 1	$69625
III.	Book value of Equipment at Dec. 31, Year 2	I - II	$243975
IV.	Estimated salvage value	$29000 + $1800	$30800
V.	Revise Estimated useful life of Equipment	(4 - 1 + 2) Years	5 Years
Depreciation Expense for Year 2		(III - IV) V	$42635