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 $ 12,000. The vehicle is purchased in late June and will be put into use on July 1, 2016. Annual insurance from GEICO runs $ 1,800 per year. The paint is starting to fade, so they spend an extra $ 3,000 to repaint the vehicle, placing the Great Adventures logo on the front hood, back, and both sides. An additional $ 2,000 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 $ 4,500.

1. Determine the amount that should be recorded for the new vehicle.
2. Indicate where any amounts not included in the Equipment account should be recorded.
3. Prepare a depreciation schedule using the straight-line method. Follow the example in Illustration 7–11, except the first and last years will have a half-year of depreciation to reflect the beginning of its service life on July 1, 2016.
4. Record the sale of the vehicle two years later on July 1, 2018, for $ 10,000.

  • CreatedJuly 15, 2014
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