Problem

Computing and revising depreciation; revenue and capital expenditures LO2 LO4 LO5 Cha...

Computing and revising depreciation; revenue and capital expenditures LO2 LO4 LO5

Champion Contractors completed the following transactions and events involving the purchase and operation

of equipment in its business.

2009

Jan. 1 Paid $287,600 cash plus $11,500 of sales tax and $1,500 of transportation-in (FOB shipping

point) for a new loader. The loader is estimated to have a four-year life and a $20,600 salvage

value. Loader costs are recorded in the Equipment account.

Jan. 3 Paid $4,800 to enclose the cab and install air conditioning in the loader to enable operations under

harsher conditions. This increased the estimated salvage value of the loader by another $1,400.

Dec. 31 Recorded annual straight-line depreciation on the loader.

Check Dec. 31, 2009, Dr. Depr.

Expense—Equip., $70,850

2010

Jan. 1 Paid $5,400 to overhaul the loader’s engine, which increased the loader’s estimated useful life

by two years.

Feb. 17 Paid $820 to repair the loader after the operator backs it into a tree.

Dec. 31 Recorded annual straight-line depreciation on the loader.

Required

Prepare journal entries to record these transactions and events.

Dec. 31, 2010, Dr. Depr.

Expense—Equip., $43,590

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