Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies....

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Tony and Suzie see the need for a rugged all-terrain vehicle totransport participants and supplies. They decide to purchase a usedSuburban on July 1, 2022, for $15,400. They expect to use theSuburban for five years and then sell the vehicle for $6,200. Thefollowing expenditures related to the vehicle were also made onJuly 1, 2022:
The company pays $2,650 to GEICO for a one-yearinsurance policy.
The company spends an extra $6,400 to repaint the vehicle,placing the Great Adventures logo on the front hood, back, and bothsides.
An additional $2,850 is spent on a deluxe roof rack and atrailer hitch.
The painting, roof rack, and hitch are all expected to increasethe future benefits of the vehicle for Great Adventures. Inaddition, on October 22, 2022, the company pays $2,100 for basicvehicle maintenance related to changing the oil, replacing thewindshield wipers, rotating the tires, and inserting a new airfilter.
Great Adventures Problem AP7-1 Part 1
Required:
1. Record the expenditures related to thevehicle on July 1, 2022. Note: The capitalized cost of the vehicleis recorded in the Equipment account. (If no entry isrequired for a transaction/event, select "No Journal EntryRequired" in the first account field.)
2. Record the depreciation expense and anyother 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 accountfield.
Record the depreciation expense for the vehicle.
Record the expiration of prepaid insurance.

Answer & Explanation Solved by verified expert

4.2 Ratings (766 Votes)


1	Capitalized cost of the vehicle


	Suburban Price	15400.00
	one-year insurance policy	2650.00
	repaint the vehicle	6400.00
	deluxe roof rack and a trailer hitch	2850.00
	Total Cost	27300.00

	As painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures, it needs to be capitalised.


	Journal Entry

	Equipment A/c	Dr.	27300.00
	To Vendor A/c	Cr		15400.00
	To Cash A/c	Cr		11900.00
	(Being Equipment Purchased)




2	Depreciation ( Per annum) on Straight Line method basis	=	Original cost - Residual Value
			Useful Life


		=	27300-6200
			5

		=	4220
	relevant depreciation amount	=	4220/12*6		2110

	Journal Entry
	Depreciation A/c	Dr.	2110
	To Equipment	Cr		2110
	( Being Depreciation Charged)

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Transcribed Image Text

Tony and Suzie see the need for a rugged all-terrain vehicle totransport participants and supplies. They decide to purchase a usedSuburban on July 1, 2022, for $15,400. They expect to use theSuburban for five years and then sell the vehicle for $6,200. Thefollowing expenditures related to the vehicle were also made onJuly 1, 2022:The company pays $2,650 to GEICO for a one-yearinsurance policy.The company spends an extra $6,400 to repaint the vehicle,placing the Great Adventures logo on the front hood, back, and bothsides.An additional $2,850 is spent on a deluxe roof rack and atrailer hitch.The painting, roof rack, and hitch are all expected to increasethe future benefits of the vehicle for Great Adventures. Inaddition, on October 22, 2022, the company pays $2,100 for basicvehicle maintenance related to changing the oil, replacing thewindshield wipers, rotating the tires, and inserting a new airfilter.Great Adventures Problem AP7-1 Part 1Required:1. Record the expenditures related to thevehicle on July 1, 2022. Note: The capitalized cost of the vehicleis recorded in the Equipment account. (If no entry isrequired for a transaction/event, select "No Journal EntryRequired" in the first account field.)2. Record the depreciation expense and anyother 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 accountfield.Record the depreciation expense for the vehicle.Record the expiration of prepaid insurance.