Required informationSkip to question [The following information applies to the questions displayed below.] The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year. Year 1Acquired $73,000 cash from the issue of common stock.Purchased a used wrecker for $35,000 cash. It has an estimated useful life of three years and a $6,000 salvage value.Paid sales tax on the wrecker of $4,000.Collected $59,100 in towing fees.Paid $12,300 for gasoline and oil.Recorded straight-line depreciation on the wrecker for Year 1.Closed the revenue and expense accounts to Retained Earnings at the end of Year 1.Year 2Paid for a tune-up for the wrecker’s engine, $1,200.Bought four new tires, $1,550.Collected $65,000 in towing fees.Paid $18,300 for gasoline and oil.Recorded straight-line depreciation for Year 2.Closed the revenue and expense accounts to Retained Earnings at the end of Year 2.Year 3Paid to overhaul the wrecker’s engine, $5,100, which extended the life of the wrecker to a total of four years. The salvage value did not change.Paid for gasoline and oil, $19,400.Collected $68,000 in towing fees.Recorded straight-line depreciation for Year 3.Closed the revenue and expense accounts at the end of Year 3. b. For each year, record the transactions in general journal form and post them to T-accounts.

Journal Entry - Journal entry is the recording of business transaction in books of account, this is…

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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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[The following information applies to the questions displayed below.]

The following transactions relate to Academy Towing Service. Assume the transactions for the purchase of the wrecker and any capital improvements occur on January 1 of each year.

Year 1

Acquired $73,000 cash from the issue of common stock.
Purchased a used wrecker for $35,000 cash. It has an estimated useful life of three years and a $6,000 salvage value.
Paid sales tax on the wrecker of $4,000.
Collected $59,100 in towing fees.
Paid $12,300 for gasoline and oil.
Recorded straight-line depreciation on the wrecker for Year 1.
Closed the revenue and expense accounts to Retained Earnings at the end of Year 1.

Year 2

Paid for a tune-up for the wrecker’s engine, $1,200.
Bought four new tires, $1,550.
Collected $65,000 in towing fees.
Paid $18,300 for gasoline and oil.
Recorded straight-line depreciation for Year 2.
Closed the revenue and expense accounts to Retained Earnings at the end of Year 2.

Year 3

Paid to overhaul the wrecker’s engine, $5,100, which extended the life of the wrecker to a total of four years. The salvage value did not change.
Paid for gasoline and oil, $19,400.
Collected $68,000 in towing fees.
Recorded straight-line depreciation for Year 3.
Closed the revenue and expense accounts at the end of Year 3.

b. For each year, record the transactions in general journal form and post them to T-accounts.

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