5 Champion Contractors completed the following transactions and events involving

Question

5 Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business 1.81 points 2016 Jan. 1 Paid $250,000 cash plus $10,000 in sales tax and $1,900 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $25,000 salvage value. Loader costs are recorded in the Equipment account. Jan 3 Paid $4,000 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 $1,200 eBook Dec. 31 Recorded annual straight-line depreciation on the loader 2017 Jan. 1 Paid $4,600 to overhaul the loader's engine, which increased the loader's estimated useful life by two years Feb. 17 Paid $1,150 to repair the loader after the operator backed it into a tree. Dec. 31 Recorded annual straight-line depreciation on the loader Print Required: References Prepare journal entries to record these transactions and events.

Explanation / Answer

2016

Jan. 1 Paid $250000 cash plus $10000 in sales tax and $1,900 in transportation (FOB shipping point) for a new LOADER. The LOADER is estimated to have a four-year life and a $25,000 salvage value. loader costs are recorded in the Equipment account.
Dr Equipment 261,900
Cr Cash 261,900

Jan. 3 Paid $4,000 to paint the company logo and install air conditioning in the loader. This increased the estimated salvage value of the loader by another $1,200.
Dr Equipment 4,000
Cr Cash 4,000

Dec. 31 Recorded annual straight-line depreciation on the loader
(261900 + 4000 - 25000) / 4 = $60225 depreciation
Dr Depreciation Expense--Equipment $60225
Cr Accumulated Depreciation--Equipment $60225

2017

Jan. 1 Paid $4,600 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two year.
Dr Accumulated Depreciation--Equipment 4600
Cr Cash 4600


Feb. 17 Paid $1150 to repair the loader engine after the loader operator damaged it while in use.
Dr Repairs Expense 1150
Cr Cash 1150

Dec. 31 Recorded annual straight-line depreciation on the loader.
261900 + 4000 - 60225 + 4600 = $210275 new book value
(210275 - 26200) / 4 = $46018 depreciation
Dr Depreciation Expense--Equipment 46018
Cr Accumulated Depreciation--Equipment 46018

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