Question

During a three-year period, Craig Excavation completed the following transactions pertaining to its front-end loader:
Year 1
June 30 Bought a front-end loader, $ 39,500, paying $ 15,500 in cash and issuing a series of four notes for $ 6,000 each to come due at six-month intervals. Payments are to include principal plus 9 percent interest on all outstanding notes.
July 1 Paid transportation charges for the loader, $ 550.
Dec. 31 Paid the principal, $ 6,000, on the first note, plus interest of $ 1,080 on $ 24,000 on all of the notes
31 Made the adjusting entry to record depreciation on the loader for the fiscal year. The estimated life of the loader is four years; it has a salvage value of $ 3,000. Craig’s accountant uses the double-declining-balance method.
31 Closed the expense accounts to the Income Summary account.
Year 2
Mar. 14 Paid for normal mechanical repairs to the front-end loader, $ 1,835.
June 30 Paid the principal, $ 6,000, on the second note, plus interest of $ 810 on $ 18,000 on the remaining notes.
Dec. 31 Paid the principal, $ 6,000, on the third note, plus interest of $ 540 on $ 12,000 on the remaining notes.
31 Recorded the adjusting entry for depreciation for the fiscal year.
31 Closed the expense accounts to the Income Summary account.
Year 3
Apr. 21 Paid for normal mechanical repairs to the front-end loader, $ 750.
June 30 Paid the principal, $ 6,000, plus interest of $ 270 on $ 6,000 on the fourth note.
Sept. 27 Craig Excavation decided to get rid of its loader and use the services of an equipment rental firm in the future. Sold the loader for $ 6,200 cash. Made the entry to depreciate the loader to date. Made the entry to account for the sale of the loader.
Dec. 31 Closed the expense accounts to the Income Summary account.

Required
1. Record the transactions in general journal form, pages 192–194.
2. After making each journal entry, post to the following ledger accounts: Equipment, No. 141; Accumulated Depreciation, Equipment, No. 142; Equipment Maintenance Expense, No. 529; Depreciation Expense, Equipment, No. 533; Interest Expense, No. 541; and Loss on Disposal of Property and Equipment, No. 542.



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  • CreatedOctober 21, 2014
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