Year 1Jan. 1 Paid $287,600 cash plus $11,500 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 $20,600 salvage value. Loader costs are recorded in the Equipment account.Jan. 3 Paid $4,800 to 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. Year 2Jan. 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 for minor repairs to the loader after the operator backed it into a tree.Dec. 31 Recorded annual straight-line depreciation on the loader. Required:Prepare journal entries to record these transactions and events.*Debt Equipment

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Year 1

Jan.	1	Paid $287,600 cash plus $11,500 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 $20,600 salvage value. Loader costs are recorded in the Equipment account.
Jan.	3	Paid $4,800 to 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.

Year 2

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 for minor repairs to the loader after the operator backed it into a tree.
Dec.	31	Recorded annual straight-line depreciation on the loader.

Required:

Prepare journal entries to record these transactions and events.

*Debt Equipment

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