Answer:
book value = $13,200 (purchase price) + $4,200 (paint) + $2,300 (accessories) = $19,700
useful life 5 years, salvage value $5,100
assuming the company uses straight line depreciation:
depreciation per year = ($19,700 - $5,100) / 5 years = $2,920 per year
the journal entries to record the purchase of the vehicle and the improvements are:
July 1, 2022, vehicle is purchased
Dr Suburban SUV 13,200
Cr Cash 13,200
July 1, 2022, vehicle's paint and accessories
Dr Suburban SUV 6,500
Cr Cash 6,500
the journal entry to record depreciation expense ($2,920 x 6 months)
December 31, 2022, depreciation expense
Dr Depreciation expense 1,460
Cr Accumulated depreciation - Suburban SUV 1,460
the journal entry to record insurance expense ($2,100 x 6 months)
December 31, 2022, insurance expense
Dr Insurance expense 1,050
Cr Prepaid insurance 1,050
