Question

Champion Contractors completed the following transactions involving equipment. Year 1 Jan. 1 Paid $302,000 cash plus $12,080 in sales tax and $1,900 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $30,200 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $4,000 to install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,200. Dec. 31 Recorded annual straight-line depreciation on the loader. Year 2 Jan. 1 Paid $4,900 to overhaul the loader's engine, which increased the loader's estimated useful life by two years. Feb. 17 Paid $1,225 for minor repairs to the loader after the operator backed it into a tree. Dec. 31 Recorded annual straight-line depreciation on the loader. Required: Prepare journal entries to record these transactions and events.

Answer 1

Date	General Journal	Debit	Credit
Jan 1,Year 1	Equipment	315,980		=302000+12080+1900
	Cash		315,980
Jan 3,Year 1	Equipment	4,000
	Cash		4,000
Dec 31,Year 1	Depreciation expense—Equipment	72,145		=(315980+4000-30200-1200)/4
	Accumulated depreciation—Equipment		72,145
Jan 1,Year 2	Equipment	4,900
	Cash		4,900
Feb 17,Year 2	Repairs expense—Equipment	1225
	Cash		1,225
Dec 31,Year 2	Depreciation expense—Equipment	44,267		=(315980+4000+4900-30200-1200-72145)/5
	Accumulated depreciation—Equipment		44,267