Question

Quality Move Company made the following expenditures on one of its delivery trucks:

Mar. 20. Replaced the transmission at a cost of $1,890.
June 11. Paid $1,350 for installation of a hydraulic lift.
Nov. 30. Paid $55 to change the oil and air filter.
Prepare journal entries for each expenditure. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Mar 20

Dr Accumulated depreciation Delivery Truck 1,890

Cr Cash 1,890

( to record the replace of the transmission)

June 11

Dr Delivery Truck 1,350

Cr Cash 1,350

(to record installation of a hydraulic lift)

Nov 30

Dr Repairs expenses 55

Cr Cash 55

( to record change the oil and air filter expenses)

Step-by-step explanation:

For Mar.20 transaction, the replace of the transmission make the delivery truck "newer". In other words, the old transmission system of the truck had been depreciated and reflecting through the Accumulated Depreciation account which should be removed to raise up the Net book value of the Delivery truck to truly reflect the rise in value of the Truck given its newly transmission system.

For June.11 transaction, the new installation of hydraulic lift obviously improve the value of the truck which should be capitalized to update the truck's value in accounting book.

For Nov.30, it is a normal repairs/maintenance activities which do not have significant influence on the truck value. So, it should be expensed.