Tower Company owned a service truck that was purchased at the beginning of 2016 for...
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Accounting
Tower Company owned a service truck that was purchased at the beginning of 2016 for $32,000. It had an estimated life of three years and an estimated salvage value of $5,000. Tower Company uses straight-line depreciation. Its financial condition as of January 1, 2018, is shown in the following financial statements model:
Assets
=
Equity
Rev.
Exp.
=
Net Inc.
Cash Flow
Cash
+
Book Value of Truck.
=
Com. Stk.
+
Ret. Earn.
21,000
+
14,000
=
10,000
+
25,000
NA
NA
=
NA
NA
In 2018, Tower Company spent the following amounts on the truck:
Jan. 4
Overhauled the engine for $6,100. The estimated life was extended one additional year, and the salvage value was revised to $4,000.
July 6
Obtained oil change and transmission service, $260.
Aug. 7
Replaced the fan belt and battery, $360.
Dec. 31
Purchased gasoline for the year, $7,600.
Recognized 2018 depreciation expense.
Required
a.
Record the 2018 transactions in a statements model like the preceding one. (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change and NA for not affected. Round your answers to the nearest dollar amount. Enter any decreases to account balances with a minus sign.)
TOWER COMPANY
Statements Model for 2018
Assets
=
Stockholders Equity
Revenue
Expense
=
Net Income
Cash Flow
No
Cash
+
Book Value of Truck
=
Common Stock
+
Retained Earnings
=
Balance
21,000
+
14,000
=
10,000
+
25,000
=
NA
1/4
+
=
+
=
7/6
+
=
+
=
8/7
+
=
+
=
12/31
12/31
Total
21,000
+
14,000
=
10,000
+
25,000
0
0
=
0
0
b.
Prepare journal entries for the 2018 transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1. Overhauled the engine for $6,100. The estimated life was extended one additional year, and the salvage value was revised to $4,000. 2.Obtained oil change and transmission service, $260.
3.
Date
General Journal
Debit
Credit
Jan 04
*Enter debits bef
Answer & Explanation
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