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Great Adventures Problem AP7-1

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Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $14,600. They expect to use the Suburban for five years and then sell the vehicle for $5,800. The following expenditures related to the vehicle were also made on July 1, 2022:

• The company pays $2,450 to GEICO for a one-year insurance policy.
• The company spends an extra $5,600 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides.
• An additional $2,650 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. In addition, on October 22, 2022, the company pays $1,700 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter.

Great Adventures Problem AP7-1 Part 4

4. Record the depreciation expense and any other adjustments related to the vehicle on December 31, 2022. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

• Record the depreciation expense for the vehicle.
• Record the expiration of prepaid insurance.

Answer 1

Cost of vehicle ($14,600+$5,600+2,650)	$    22,850
Less: Salvage value	$    (5,800)
Depreciable value	$    17,050
Life of vehicle	5 Years
Depreciation per year ($17,050/5)	$       3,410
Depreciation expense for 2022 ($3,410/12 months*6 months)	$       1,705

Journal Entries Will be:

Depreciation Expense	$ 1,705
Accumulated Depreciation - Vehicle		$ 1,705
Insurance Expense ($2,450/12*6)	1225
Prepaid Insurance		1225

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