Polaris Transportation wants to replace its old fleet of vehicles and purchase 6 new vehicles. Information about these vehicles is listed below: • Purchase price: $29,850 per vehicle • PST: $2,388 per vehicle • GST: $1,493 per vehicle • New tires and brakes for all six vehicles: $4,500 total. • Estimated annual costs for oil changes and regular maintenance: $120 per vehicle Before investing in new vehicles, Polaris must dispose of their current fleet of 5 vehicles that were purchased on April 1, 2016 at a total cost of $285,000. When purchased, the old vehicles were expected to have a life of 6 years with a residual value of $2,000 per vehicle. Disposal of the old vehicles will occur on September 1, 2020, to coincide with the arrival of the new vehicles. Polaris has a December 31st year end and records depreciation expense annually. Required: Part A Treat the following situations independently and round all your numbers to the 2nd decimal place. Prepare the journal entries to dispose of the 5 old vehicles, assuming: a. The vehicles were sold for $2,500 each and the company uses straight line depreciation. b. The vehicles were sold for $5,400 each and the company uses Double Declining Balance depreciation. Part B If Polaris purchased the six new vehicles, what would be the capitalized cost for the six new vehicles?
Polaris Transportation wants to replace its old fleet of vehicles and purchase 6 new vehicles. Information about these vehicles is listed below: • Purchase price: $29,850 per vehicle • PST: $2,388 per vehicle • GST: $1,493 per vehicle • New tires and brakes for all six vehicles: $4,500 total. • Estimated annual costs for oil changes and regular maintenance: $120 per vehicle Before investing in new vehicles, Polaris must dispose of their current fleet of 5 vehicles that were purchased on April 1, 2016 at a total cost of $285,000. When purchased, the old vehicles were expected to have a life of 6 years with a residual value of $2,000 per vehicle. Disposal of the old vehicles will occur on September 1, 2020, to coincide with the arrival of the new vehicles. Polaris has a December 31st year end and records depreciation expense annually. Required: Part A Treat the following situations independently and round all your numbers to the 2nd decimal place. Prepare the journal entries to dispose of the 5 old vehicles, assuming: a. The vehicles were sold for $2,500 each and the company uses straight line depreciation. b. The vehicles were sold for $5,400 each and the company uses Double Declining Balance depreciation. Part B If Polaris purchased the six new vehicles, what would be the capitalized cost for the six new vehicles?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Polaris Transportation wants to replace its old fleet of vehicles and purchase 6 new vehicles. Information
about these vehicles is listed below:
• Purchase price: $29,850 per vehicle
• PST: $2,388 per vehicle
• GST: $1,493 per vehicle
• New tires and brakes for all six vehicles: $4,500 total.
• Estimated annual costs for oil changes and regular maintenance: $120 per vehicle
Before investing in new vehicles, Polaris must dispose of their current fleet of 5 vehicles that were
purchased on April 1, 2016 at a total cost of $285,000. When purchased, the old vehicles were expected to
have a life of 6 years with a residual value of $2,000 per vehicle. Disposal of the old vehicles will occur on
September 1, 2020, to coincide with the arrival of the new vehicles. Polaris has a December 31st year end
and records depreciation expense annually.
Required:
Part A
Treat the following situations independently and round all your numbers to the 2nd decimal place. Prepare
the journal entries to dispose of the 5 old vehicles, assuming:
a. The vehicles were sold for $2,500 each and the company uses straight line depreciation.
b. The vehicles were sold for $5,400 each and the company uses Double Declining Balance depreciation.
Part B
If Polaris purchased the six new vehicles, what would be the capitalized cost for the six new vehicles?
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