Computing and revising depreciation; revenue and capital expenditures LO2 LO4 LO5
Mercury Delivery Service completed the following transactions and events involving the purchase and operation
of equipment for its business.
2009
Jan. 1 Paid $25,860 cash plus $1,810 in sales tax for a new delivery van that was estimated to have
a five-year life and a $3,670 salvage value. Van costs are recorded in the Equipment account.
Jan. 3 Paid $1,850 to install sorting racks in the van for more accurate and quicker delivery of packages.
This increases the estimated salvage value of the van by another $230.
Dec. 31 Recorded annual straight-line depreciation on the van.
Check Dec. 31, 2009, Dr. Depr.
Expense—Equip., $5,124
2010
Jan. 1 Paid $2,080 to overhaul the van’s engine, which increased the van’s estimated useful life by
two years.
May 10 Paid $800 to repair the van after the driver backed it into a loading dock.
Dec. 31 Record annual straight-line depreciation on the van. (Round to the nearest dollar.)
Required
Prepare journal entries to record these transactions and events.
Check Dec. 31, 2010, Dr. Depr.
Expense—Equip., $3,763
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