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 Jan. 1 Paid $287,600 cash plus $11,500 in sales tax and $1,500 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $20,600 salvage value. Loader costs are recorded in the Equipment account. Jan. 3 Paid $4,800 to enclose the cab and install air-conditioning in the loader to enable operations under Dec. 31 Recorded annual straight-line depreciation on the loader 2017 Jan. 1 Paid $5,400 to overhaul the loader's engine, which increased the loader's estimated useful life by two Feb. 17 Paid $820 to repair the loader after the operator backed it into a tree. harsher conditions. Thin increased the estimated salvage value of the loader by another 1,400 years. Dec. 31 Recorded annual straight-line depreciation on the loader

Explanation / Answer

Date General Journal Debit Credit 01-Jan Equipment 300600 Cash 300600 (287600+11500+1500) 03-Jan Equipment 4800 Cash 4800 Total original cost Plus cost of betterment 300600+4800 305400 Revised cost of equipment Less revised salvage 20600+1400 22000 Cost to be depreciated 283400 Annual Depriciaiton 70850 31-Dec Depreciation Expense-Equipment 70850 Accumulated Depreciation-Equipment 70850 01-Jan Equipment 4700 Cash 4700 17-Feb Repairs Expense-Equipment 820 Cash 820 31-Dec Depreciation Expense-Equipment 43590 Accumulated Depreciation-Equipment 43590 Total cost 305400+5400 310800 Less accumulated depreciation 310800-70850 239950 Book Value Less salvage 239950-22000 217950 Remaining cost to be depreciated 217950 Revised remaining useful life (original 4 years-1yr.+2yrs) 5 Revised annual depreciation 43590

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