Champion Contractors completed the following transactions and events involving t

Question

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business.

2016

2017

Required:

Prepare journal entries to record these transactions and events.

Jan. 1 Paid $286,000 cash plus $11,440 in sales tax and $1,800 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $28,600 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $5,000 to enclose the cab and install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,500. Dec. 31 Recorded annual straight-line depreciation on the loader.

Explanation / Answer

Date General Journal Debit Credit 2016 01-Jan Equipment 299240 Cash 299240 286000+11440+1800 03-Jan Equipment 5000 Cash 5000 31-Jan Depreciation Expense-Equipment 68535 Accumulated Depreciation-Equipment 68535 [299240+5000-scrap(28600+1500)]/4 2017 01-Jan Equipment 4800 Cash 4800 17-Feb Repairs Expense-Equipment 1200 Cash 1200 31-Dec Depreciation Expense-Equipment 42081 Accumulated Depreciation-Equipment 42081 (299240+5000+4800-accumulated depriciation 68535)-salvage value(28600+1500)/(4yrs-1yr+increase in estimated useful life 2years=5yrs)

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