Question

Champion Contractors completed the following transactions involving equipment.

Year 1

Jan.		1		Paid $302,000 cash plus $12,080 in sales tax and $1,800 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $30,200 salvage value. Loader costs are recorded in the Equipment account.
Jan.		3		Paid $5,000 to install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,500.
Dec.		31		Recorded annual straight-line depreciation on the loader.

Year 2

Jan.		1		Paid $4,000 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.
Feb.		17		Paid $1,000 for minor repairs to 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.
1)Paid $302,000 cash plus $12,080 in sales tax and $1,800 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $30,200 salvage value. Loader costs are recorded in the Equipment account.

2)Paid $5,000 to install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,500

3)Recorded annual straight-line depreciation on the loader.

4)Paid $4,000 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

5)Paid $1,000 for minor repairs to the loader after the operator backed it into a tree.

6)Recorded annual straight-line depreciation on the loader.

Answer 1

Date	General Journal	Debit	Credit
Jan 1, Year 1	Equipment	315,880		=302000+12080+1800
	Cash		315,880
Jan 3, Year 1	Equipment	5,000
	Cash		5,000
Dec 31, Year 1	Depreciation expense—Equipment	72,295		=(315880+5000-30200-1500)/4
	Accumulated depreciation—Equipment		72,295
Jan 1, Year 2	Equipment	4,000
	Cash		4,000
Feb 17, Year 2	Repairs expense—Equipment	1000
	Cash		1,000
Dec 31, Year 2	Depreciation expense—Equipment	44,177		=(315880+5000+4000-30200-1500-72295)/5
	Accumulated depreciation—Equipment		44,177