Question

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

Mar. 20 Replaced the transmission at a cost of $1,970.
June 11 Paid $1,455 for installation of a hydraulic lift.
Nov. 30 Paid $56 to change the oil and air filter.
Prepare journal entries for each expenditure.
Journal
Accounting Equation
Date Description Post. Ref. Debit Credit Assets Liabilities Equity
1
2
3
4
5
6

Answer 1

Answer with its Explanation:

On 20th of March, The replacement of transmission is not the maintenance cost as it is the replacement of asset within the delivery truck, hence it must be capitalized.

The Double entry would be:

Dr Delivery Truck 1,970

Cr Cash $1,970

On 11th of June, the installation of hydraulic lift is an addition of upgraded asset in the delivery truck hence it must be capitalized.

The Double entry would be:

Dr Delivery Truck $1,455

Cr Cash $1,455

On 30th of November, the changing of oil and air filer is repair and maintenance cost and hence must be treated as under:

Dr Repairs and Maintenance Expense $56

Cr Cash $56