Steve\'s Outdoor Company purchased a new delivery van on January 1 for $55,000 p

Question

Steve's Outdoor Company purchased a new delivery van on January 1 for $55,000 plus $4,700 in sales tax. The company paid $13,700 cash on the van (including the sales tax), with the $46,000 balance on credit at 7 percent interest due in nine months (on September 30). On January 2, the company paid cash of $800 to have the company name and logo painted on the van. On September 30, the company paid the balance due on the van plus the interest. On December 31 (the end of the accounting period), Steve's Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $5,500.

Required: 1. Indicate the effects (accounts, amounts, and+or- of each transaction on the accounting equation. Use the following schedule: (If the transaction does not impact the accounting equation choose "No effect" Date Assets Liabilities Stockholders' Equity January 1 January 2 September 30

Explanation / Answer

Solution:

Date Assets = Liabilities + Stockholder's Equity 1-Jan VAN $59,700.00 Notes Payable $46,000.00 Cash -$13,700.00 2-Jan VAN $800.00 Cash -$800.00 30-Sep Cash -$48,415.00 Notes Payable -$46,000.00 Interest Expense -$2,415.00 31-Dec Accumulated Depreciation $11,000.00 Depreciation expense -$11,000.00

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