Record the following transactions in the general journal of White Company for 20

Question

Record the following transactions in the general journal of White Company for 201X:

Feb. 5     Purchased land for $93,000. The $93,000 included attorney’s fees of $6,300.

Feb. 18     White Company decided to pave the parking lot for $5,400.

Mar. 24     Purchased a building for $91,000, putting down 34% and mortgaging the remainder.

Mar. 29     Bought equipment for $36,000. Freight and assembly were an additional $3,600.

May 10     Added a new wing for $160,000 to building that was purchased on March 24.

June 15     Performed ordinary repair work on equipment purchased March 29, $850, to maintain its normal operations.

July 1     Bought a truck for $14,500.

Oct. 15     Added a hydraulic loader to truck, $2,300.

Nov. 30     Truck purchased in July was brought in for grease and oil, $32.

Dec. 30     Overhauled truck’s motor for $900, extending its life by more than one year.

Dec. 31     Changed tires on truck, $400.

Explanation / Answer

If the expenses incurred to purchase an asset, extend its life/capacity/efficieny, it should be capatilized. We book expense in R&M head when it is incurred in normal course of business to maintain assets life/current position/effeciency.

Journal Entry in the Books of White Company                 (Amount in $) No. Date Name of Account & Description Debit Credit 1 Feb-05 Land 93000 Cash 93000 (Purchased land included attorny's Charges) 2 Feb-18 Parking lot 5400 cash 5400 (To parking lot paved) 3 Mar-24 Building 91000 Cash 30940 Mortgage Loan-Building 60060 (To building purchased in 34% cash i.e. 91000*34%= $30940 & remaining mortgage i.e. 91000-30940= $60060) 4 Mar-29 Equipment 39600 Cash 39600 (To equipment cost capatilized inc. freight & installation charges) 5 May-10 Building 160000 cash 160000 (To new wing added in building) 6 Jun-15 Repair & Maintainance Expenses 850 Cash 850 (To equipment repaired) 7 Jul-01 Truck 14500 Cash 14500 (To truck purchased) 8 Oct-15 Truck 2300 Cash 2300 (To hydraulic loader added to truck) 9 Nov-30 Repair & Maintainance Expenses 32 Cash 32 (To grease & oil work done) 10 Dec-30 Truck 900 Cash 900 (To truck's motor overhauled) 11 Dec-31 Repair & Maintainance Expenses 400 Cash 400 (To truck's tyres changed)

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