Question

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, 2019. 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 $4,900.

Great Adventures Problem 7-1 Part 1

Required:

1. Determine the amount that should be recorded for the new vehicle.

Great Adventures Problem 7-1 Part 3

3. Prepare a depreciation schedule using the straight-line method.

Great Adventures Problem 7-1 Part 4

4. Record the sale of the vehicle two years later on July 1, 2021, for $11,200. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1. Amount to be recorded for the new vehicle = $13600 + $3400 + $2400 = $19400

3. Annual depreciation = ($19400 - $4900)/5 years = $14500/5 years = $2900

Year	Depreciation Expense	Accumulated Depreciation	Book Value
1	1450	1450	17950
2	2900	4350	15050
3	2900	7250	12150
4	2900	10150	9250
5	2900	13050	6350
6	1450	14500	4900
Total	14500

4.

Date	General Journal	Debit	Credit
July 01, 2021	Cash	11200
	Accumulated depreciation ($2900 x 2)	5800
	Loss on sale of asset	2400
	Vehicle		19400
	(To record sale of vehicle)