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. 2014 Jan. 1 Paid $274,000 cash plus $10,960 in sales tax and $1,700 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $27,400 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $7,000 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 $2,100. Dec. 31 Recorded annual straight-line depreciation on the loader. 2015 Jan. 1 Paid $4,300 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years. Feb. 17 Paid $1,075 to repair the loader after the operator backed it into a tree. Dec. 31 Recorded annual straight-line depreciation on the loader. (Show work)

Required: Prepare journal entries to record these transactions and events.

1. Jan 1, 2014 - Paid $274,000 cash plus $10,960 in sales tax and $1,700 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $27,400 salvage value. Loader costs are recorded in the Equipment account.

2. Jan 3, 2014 - Paid $7,000 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 $2,100.

3. Dec 31,2014- Recorded annual straight-line depreciation on the loader.

4. Jan 1, 2015 - Paid $4,300 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

5. Feb 17, 2015- Paid $1,075 to repair the loader after the operator backed it into a tree.

6. Dec 31, 2015- Recorded annual straight-line depreciation on the loader.

Explanation / Answer

Asset schedule & depreciation working Jan 2014. Details Equipment value salvage value   Depreciable value Useful life Yearly depreciation Year end book value Cashpaid        274,000 Sales tax          10,960 Transport            1,700 Cab & AC            7,000 Total        293,660        29,500       264,160              4               66,040         227,620 2015 Engine overhaul 4300 Total        231,920        29,500       202,420              5               40,484         191,436 Journal Entry Date Account Dr $ Cr $ Jan 1.2014. Equipment A/C        293,600 Cash     274,000 Cash -Sales Tax paid        10,960 Cash -Freight Paid          1,700 Jan 3. 2014. Equipment A/C            7,000          7,000 Cash Dec31. 2014 Depreciation Expense          66,040 Accumulated depreciation on Equipment        66,040 Jan 1.2015. Equipment A/C            4,300 Cash          4,300 Feb 17. 2015. Repair expense            1,075 Cash          1,075 Dec31. 2015. Depreciation Expense          40,484 Accumulated depreciation on Equipment        40,484

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