Question

Required information

[The following information applies to the questions displayed below.]

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 $12,000. They expect to use the Suburban for five years and then sell the vehicle for $4,500. The following expenditures related to the vehicle were also made on July 1, 2022:

• The company pays $1,800 to GEICO for a one-year insurance policy.
• The company spends an extra $3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides.
• An additional $2,000 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 $400 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.)

2. Record the expenditure related to vehicle maintenance on October 22, 2022. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

3. Prepare a depreciation schedule using the straight-line method.

4. Record the depreciation expense and any other adjustments related to the vehicle on December 31, 2022. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

5. Record the sale of the vehicle two years later on July 1, 2024, for $10,000. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
  

Answer 1

Solution (1) Date DR. (8) CR. CE July 1, 2022 Particulars No Jounal Entry Required ( Insurmie Policy) (Avo see Note 2) Equipment Account Cash/ Bank C 3000 + 2000) 5000 July 1, 2022 5000 (2) No October 22, 2022 Jounal Entry Required (3) (Also see note 2) Amount ($) 17000 (4500) Depreciation - Straight line method - Particulars Cast of Equipment (vehicle) [ 12000 + 5000] Less: sell value Net costo Divide : useful life Depreciation Every year 12500 2 Soo (41) Date December 31,2022 DR.CS) 1250 Particulars Depreciation Expense Equipment Account CR-($) 1250 (2500x6) July to December

(6) Particulars DR. (8) CR. CA Date July Cash / Bank Account Loss on sale of vehicle Equipment Account 10,000 2000 1, 2024 12000 - 2500 - 1250 PLE 17000 - 1250 (1st Geronths = 12000 (2 ear deprecarion) 6 Chy Depreeroner) Notes: " where have would entry shown not evas not related as entry not affect the cost to vehicle, we required as it of vehicle. 2. per year schedule schedule full 5 years In case depreciation would be of is as Repreciation calculated, follows Amount ($) Period 125 250o 2500 July 1 2022 - Dec 31 2022 Jan 1 2023 - Dec 31 2023 Jan 1 2024 - Dec 31 2024 Jan 1 2025 - Dec 31 2025 Jan 1 2026 - Dec 31 2026 Jon 1 2027 - July 1 2027 2500 2500 1250 12 500 Total