Question

Year 1 January 1 Paid $262,000 cash plus $10,480 in sales tax and $1,500 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $26,200 salvage value. Loader costs are recorded in the Equipment account. January 3 Paid $4,000 to install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,200. December 31 Recorded annual straight-line depreciation on the loader. Year 2 January 1 Paid $4,100 to overhaul the loader's engine, which increased the loader's estimated useful life by two years. February 17 Paid $1,025 for minor repairs to the loader after the operator backed it into a tree. December 31 Recorded annual straight-line depreciation on the loader. Required: Prepare journal entries to record these transactions and events. View transaction list Journal entry worksheet 1 2 3 4 5 6 Paid $262,000 cash plus $10,480 in sales tax and $1,500 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four- year life and a $26,200 salvage value. Loader costs are recorded in the Equipment account. Note: Enter debits before credits. Date General Journal Debit Credit January 1, Year 1 Record entry View general journal Clear entry

Questions are:

Paid $262,000 cash plus $10,480 in sales tax and $1,500 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $26,200 salvage value. Loader costs are recorded in the Equipment account.

Paid $4,000 to install air conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $1,200.

Recorded annual straight-line depreciation on the loader.

Paid $4,100 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

Paid $1,025 for minor repairs to the loader after the operator backed it into a tree.

Recorded annual straight-line depreciation on the loader.

Answer 1

The student must account for a loader's purchase, improvements, and maintenance in a company's fixed assets, including initial recording, adjustments for value enhancement, and depreciation calculation adjustments.

Step-by-step explanation:

The student is dealing with transactions affecting a company's fixed assets, specifically a loader. They must understand how to initially record the asset and subsequent expenditures that affect the asset's value, useful life, and the calculation for depreciation expense.

Journal Entries Explanation

1. Initial Purchase: Debit Equipment for the cost of the loader, including sales tax and transportation, and credit Cash.
2. Improvement to Equipment: Debit Equipment for the cost of adding air conditioning, as it extends the loader's capability, and credit Cash. Adjust the salvage value accordingly.
3. Depreciation: Record depreciation expense to allocate the cost of the loader over its useful life, which adjusts after the overhaul in Year 2.
4. Overhaul of Loader: Debit Equipment for the overhaul expense that extends the loader's useful life, and credit Cash.
5. Repairs: Debit Maintenance Expense for minor repairs since it does not increase the loader's life, and credit Cash.
6. Adjusted Depreciation: Calculate new depreciation based on the adjusted useful life and revised salvage value after the overhaul.

The cost of labor and cost of machine are not directly relevant to the journal entries for this student's accounting transactions.