2014Jan.1 Paid $270,000 cash plus $10,800 in sales tax and $2,000 in transportat

Question

2014Jan.1  

Paid $270,000 cash plus $10,800 in sales tax and $2,000 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $27,000 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.

2015Jan.1  

Paid $4,900 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

Feb.17  Paid $1,225 to repair the loader after the operator backed it into a tree.Dec.31  Recorded annual straight-line depreciation on the loader.

Required:

Prepare journal entries to record these transactions and events.

Explanation / Answer

Journal Entries Equipment Dr 282800 To cash 282800 Laoder Dr 7000 To Cash 7000

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