Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They would love to buy a Hummer, but it is just too expensive and too small for their needs, so they settle on 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, 2013. 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. They expect to use the Suburban for five years and then sell the vehicle for $4,500.
Required:
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, 2013.
4. Record the sale of the vehicle two years later on July 1, 2015, for $10,000.