Problem 10-4A Computing and revising depreciation; revenue and capital expenditu

Question

Problem 10-4A Computing and revising depreciation; revenue and capital expenditures LO C1, C2, C3

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business.

2016

2017

Required:

Prepare journal entries to record these transactions and events.

*These are the options for the general journal

Accumulated amortization

Accumulated depletion

Accumulated depreciation—Equipment

Amortization expense

Building

Cash

Depletion expense

Depreciation expense—Equipment

Equipment

Gain on sale of equipment

Goodwill

Impairment loss

Land

Land improvements

Leasehold improvements

Loss from fire

Loss on disposal of equipment

Loss on exchange of assets

Loss on sale of equipment

Mineral deposit

Ore mine

Prepaid rent

Rent expense

Repairs expense—Equipment

Jan. 1 Paid $298,000 cash plus $11,920 in sales tax and $1,500 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $29,800 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $5,000 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 $1,500. Dec. 31 Recorded annual straight-line depreciation on the loader.

Explanation / Answer

Only can be provided the actual journal entries

Cash/Bank

(Being asset capitalised)

Cash/Bank A/C

(Being installation including air condition capitalised)

Accumulated depreciation A/C

(Being annual depreciation charged)

Cash/Bank A/C

(Being additional cost capitalised)

Cash/Bank A/C

(Being repair expenses charged)

Accumulated Depreciation A/C

(Being depreciation provided)

Repir expesed no need to capitalise. Sales tax, if credit can be possible also reversed from capitalisation. The expenses incurred to enhance capacity must be capitalised. Here only given all necessary entries , if any entries passed must be adjusted to keep this shape.

Date Accounts titles and explanation Debit in dollars Credit in dollars Jan. 1, 2016 Equipment (Loader) A/C $311,420

Cash/Bank

(Being asset capitalised)

$311,420 Jan 3, 2016 Equipment (Loader) A/C 5,000

Cash/Bank A/C

(Being installation including air condition capitalised)

5,000 Dec. 31,2016 Depreciation A/C (311,420+ 5,000 - 29,800 - 1,500) /4 71,280

Accumulated depreciation A/C

(Being annual depreciation charged)

71,280 Jan. 1, 2017 Equipment (Loader) A/C 4,300

Cash/Bank A/C

(Being additional cost capitalised)

4,300 Feb.17,2017 Repair A/C 1,075

Cash/Bank A/C

(Being repair expenses charged)

1,075 Dec. 31, 2017 Depreciation A/C (311,420 +5,000 +4,300 - 29,800 - 1,500)/ useful life 6 = 289,420/6 = 48,236.67. And depreciation for 2 years = 48,236.67 *2 = $96,473.34 and already charged $71,280 and $96,473.34 - $ 71,280 = 25,193.34 25,193.34

Accumulated Depreciation A/C

(Being depreciation provided)

25,193.34

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.