On August 7, Green River Inflatables Co. paid $1,675 to install a hydraulic lift and $40 for an air filter for one of its delivery trucks

On August 7, Green River Inflatables Co. paid $1,675 to install a hydraulic lift and $40 for an air filter for one of its delivery trucks. Journalize the entries for the new lift and air filter expenditures.


Answer:








Aug. 7 Delivery Truck 1,675
Cash 1,675
7 Repairs and Maintenance Expense 40
Cash 40




On February 14, Garcia Associates Co. paid $2,300 to repair the transmission on one of its delivery vans. In addition, Garcia Associates paid $450 to install a GPS system in its van. Journalize the entries for the transmission and GPS system expenditures.


Answer:








Feb. 14 Accumulated Depreciation—Delivery Van 2,300
Cash 2,300
14 Delivery Van 450
Cash 450




Equipment acquired at the beginning of the year at a cost of $440,000 has an estimated residual value of $25,000 and an estimated useful life of 8 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.


Answer:
a. $415,000 ($440,000 – $25,000)
b. 12.5% = (1/8)
c. $51,875 ($415,000 × 12.5%), or ($415,000 ÷ 8 years)

Equipment acquired on January 8, 2011, at a cost of $420,000, has an estimated useful life of 15 years, has an estimated residual value of $30,000

Equipment acquired on January 8, 2011, at a cost of $420,000, has an estimated useful life of 15 years, has an estimated residual value of $30,000, and is depreciated by the straight-line method.

a. What was the book value of the equipment at December 31, 2014, the end of the year?
b. Assuming that the equipment was sold on October 1, 2015, for $275,000, journalize the entries to record (1) depreciation for the nine months until the sale date, and (2) the sale of the equipment.


Answer:
















a. Cost of equipment……………………………………………………………………………… $420,000
Accumulated depreciation at December 31, 2014
(4 years at $26,000* per year)……………………………………………………………… 104,000
Book value at December 31, 2014…………………………………………………………… $316,000
* ($420,000 – $30,000) ÷ 15 = $26,000
b.
 (1) Depreciation Expense—Equipment 19,500
Accumulated Depreciation—Equipment 19,500
Equipment depreciation ($26,000 × 9/12 = $19,500).
(2) Cash 275,000
Accumulated Depreciation—Equipment* 123,500
Loss on Sale of Equipment 21,500
Equipment 420,000
* $104,000 + $19,500 = $123,500