Tony and Suzie see the need for a rugged all-terrain vehicle to transport partic
ID: 2481533 • 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.
A)
Determine the amount that should be recorded for the new vehicle.
B)
Prepare a depreciation schedule using the straight-line method. (Year 1-6)
C) 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.)
Determine the amount that should be recorded for the new vehicle.
Explanation / Answer
End of year amounts 1) Purchase price $10000 Painting and new logo 2500 Deluxe roof rack and trailer hitch 1500 Total $14000 2) Year Allocation base * Depreciation rate =Depreciation expense Accumulated expense Book Value 1 10000 0.1 1000 1000 9000 2 10000 0.2 2000 3000 7000 3 10000 0.2 2000 5000 5000 5 10000 0.2 2000 7000 3000 6 10000 0.1 1000 8000 2000 *14000-4000 3) Cash 8500 Accumulated dep 4000 Loss 1500 Equipment 14000