Question

Sunland Company had the following two transactions related to its delivery truck. 1. Paid $38 for an oil change. 2. Paid $564 to install special shelving units, which increase the operating efficiency of the truck. Prepare Harmon's journal entries to record these two transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer:

• 1. Paid $38 for an oil change.

$38 Maintenance Expenses  - DEBIT

$38 Cash - CREDIT

• 2. Paid $564 to install special shelving units, which increase the operating efficiency of the truck.

$564 Delivery Trucks - DEBIT

$564 Cash - CREDIT

Explanation:

1. Paid $38 for an oil change  

$38 Maintenance Expenses  - DEBIT

$38 Cash - CREDIT

An oil change it's just an expenses of maintenance, which goes as General Expenses directly to the Income Statement.  

 

2. Paid $564 to install special shelving units, which increase the operating efficiency of the truck.  

$564 Delivery Trucks - DEBIT

$564 Cash - CREDIT

The installations of shelving units it's an improvements in the company's fixed assets, therefore, assets improvements are activated as fixed assets in the non-current assets section of the balance sheets.