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. Accumulated DepreciationService RevenueYear 1Year 1Ending BalanceEnding BalanceYear 2Year 2Ending BalanceEnding BalanceYear 3Year 3Ending BalanceEnding BalanceMaintenance ExpenseYear 2Ending BalanceGas & Oil ExpenseYear 1Ending BalanceYear 2Ending BalanceYear 3Ending BalanceDepreciation ExpenseYear 1Ending BalanceYear 2 Year 1Year 2Year 3T AccountsGeneralJournalGeneralJournalGeneralJournalFor each year, post the entries to T-accounts.CashCommon StockYear 1Year 1Ending BalanceEnding BalanceYear 2Ending BalanceYear 3Ending BalanceWreckerRetained EarningsYear 1Year 1Ending BalanoceEnding BalanceYear 2Ending BalanceYear 3Ending Balance

Answered: used wrecker for $35,000 cash. It has…

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.

Accumulated Depreciation
Service Revenue
Year 1
Year 1
Ending Balance
Ending Balance
Year 2
Year 2
Ending Balance
Ending Balance
Year 3
Year 3
Ending Balance
Ending Balance
Maintenance Expense
Year 2
Ending Balance
Gas & Oil Expense
Year 1
Ending Balance
Year 2
Ending Balance
Year 3
Ending Balance
Depreciation Expense
Year 1
Ending Balance
Year 2

Year 1
Year 2
Year 3
T Accounts
General
Journal
General
Journal
General
Journal
For each year, post the entries to T-accounts.
Cash
Common Stock
Year 1
Year 1
Ending Balance
Ending Balance
Year 2
Ending Balance
Year 3
Ending Balance
Wrecker
Retained Earnings
Year 1
Year 1
Ending Balanoce
Ending Balance
Year 2
Ending Balance
Year 3
Ending Balance

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