Great Adventures Problem 7-1 [The following information applies to the questions
ID: 2460184 • Letter: G
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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 $13,600. The vehicle is purchased in late June and will be put into use on July 1, 2016. Annual insurance from GEICO runs $2,000 per year. The paint is starting to fade, so they spend an extra $3,400 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. An additional $2,400 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 $4,900Explanation / Answer
Vehicle Capitalization Details Amt $ Cost Of Suburban 13,600 Painting Expense 3,400 Roof Rack & Hitch 2,400 1 Total cost to be capitalized 19,400 So The vehicle to be recorded at $19400 2 Dpreciation by SL method Asset cost 19,400 Salvage Value 4,900 Depreciable cost 14,500 Useful life in years 5 SL depreciation per year 2,900 3 Great Adventures End Of The Year Amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 1,450 1,450 17,950 2 2,900 4,350 15,050 3 2,900 7,250 12,150 4 2,900 10,150 9,250 5 2,900 13,050 6,350 6 1,450 14,500 4,900 Total 14,500
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