Great Adventures Problem 7-1 [The following information applies to the questions
ID: 2459985 • Letter: G
Question
Great Adventures Problem 7-1 [The following information applies to the questions displayed below.] Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban. The cost of the Suburban is $10,400. The vehicle is purchased in late June and will be put into use on July 1, 2016. Annual insurance from GEICO runs $1,600 per year. The paint is starting to fade, so they spend an extra $2,600 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. An additional $1,600 is spent on a deluxe roof rack and a trailer hitch. The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. They expect to use the Suburban for five years and then sell the vehicle for $4,100. -Prepare a depreciation schedule using the straight-line method. -Record the sale of the vehicle two years later on July 1, 2018, for $8,800. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
Total cost of Suburban = 10400+1600+2600+1600 = $16200
Depreciation = Straight Line Method = 16200 - 4100 / 5 = $2420 per year with resale value $4100 after 5 years
Journal Entries:
July 1, 2018
Debit Depreciation $1210
Credit Accumulated Depreciation $1210
(depreciation for 6 month )
Debit Cash $8800
Debit Accumulated Depreciation $4840
Debit Loss on sales of vehicle $2560
Credit Suburban Vehicle $16200
(sales of vehicle)
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