Tony and Suzie see the need for a rugged all-terrain vehicle to transport partic
ID: 2468309 • Letter: T
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 $10,000. The vehicle is purchased in late June and will be put into use on July 1, 2016. Annual insurance from GEICO runs $1,550 per year. The paint is starting to fade, so they spend an extra $2,500 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. An additional $1,500 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 $4,000.
Record the sale of the vehicle two years later on July 1, 2018, for $8,500. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
4.Record the sale of the vehicle two years later on July 1, 2018, for $8,500. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
Determine the amount that should be recorded for the new vehicle. Purchase price 10000 Painting and new logo 2500 Deluxe roof rack and trailer hitch 1500 Total 14000 Annual insurance of $1,550 is expensed as incurred over the period from July 1, 2016 to June 30, 2018 Year Allocation Base Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value at the end 1 10000 1000 1000 13000 2 10000 2000 3000 11000 3 10000 2000 5000 9000 4 10000 2000 7000 7000 5 10000 2000 9000 5000 6 10000 1000 10000 4000 DR CR Cash 8500 Accumulated depreciation 1000+2000+(2000*6/12) 4000 Loss On sale 1500 Equipment 14000