Question: Two years ago on March 1 2012 General Waste Management

Two years ago, on March 1, 2012, General Waste Management Systems purchased five used trucks and debited the Trucks account for the total cost of $180,000. The estimated useful life and residual value per truck were determined to be five years and $5,000, respectively. $36,000 was paid for a two-year insurance policy covering the trucks effective March 1, 2012; this amount was also debited to the Trucks account since it related to the trucks. On February 1, 2013, new motors were installed in the trucks; parts cost $33,000 and labor was $7,000. New tires were also installed on this date at a total cost of $32,000, and each truck was given an oil change in addition to some minor brake work; the total cost was $2,500. All of these costs were debited to the Trucks account. Net income amounts for the years ended December 31, 2013 and 2014, were $78,000 and $85,000. The manager of the business was paid a bonus equal to 15% of net income; the 2013 bonus was paid on February 1, 2014, and recorded on that date as a debit to Bonus Expense and credit to Cash; the 2014 amount was paid on February 1, 2015, and recorded on that date as a debit to Bonus Expense and credit to Cash.

Using the elements of critical thinking described on the inside front cover, comment.

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  • CreatedJanuary 08, 2015
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