Question
Champion Contractors completed the following transactions involving equipment. Year 1 Jan. 1 Paid $306,000 cash plus $12,240 in sales tax and $1,600 in transportation (FOB
Champion Contractors completed the following transactions involving equipment.
Year 1
Jan. 1 Paid $306,000 cash plus $12,240 in sales tax and $1,600 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $30,600 salvage value. Loader costs are recorded in the Equipment account.
Jan. 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.
Dec. 31 Recorded annual straight-line depreciation on the loader.
Year 2
Jan. 1 Paid $4,100 to overhaul the loaders engine, which increased the loaders estimated useful life by two years.
Feb. 17 Paid $1,025 for minor repairs to the loader after the operator backed it into a tree.
Dec. 31 Recorded annual straight-line depreciation on the loader.
Required: Prepare journal entries to record these transactions and events.
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