Answer:
Steve's Outdoor Company purchased a new delivery van on January 1 for $47,000 plus $4,000 in sales tax. The company paid $13,000 cash on the van (including the sales tax), with the $38,000 balance on credit at 8 percent interest due in nine months (on September 30).
January 1, 202x, delivery van purchased
Dr Vehicles 51,000
Cr Cash 13,000
Cr Notes payable 38,000
The sales tax increases the asset's historical cost
On January 2, the company paid cash of $900 to have the company name and logo painted on the van.
January 2, 202x, company's logo was painted on the delivery van
Dr Vehicles 900
Cr Cash 900
On September 30, the company paid the balance due on the van plus the interest.
September 30, 202x, notes payable cancelled
Dr Notes payable 38,000
Dr Interest expense 2,280
Cr Cash 40,280
On December 31 (the end of the accounting period), Steve's Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,700.
December 31, 202x, depreciation expense
Dr Depreciation expense 9,400
Cr Accumulated depreciation, vehicles 9,400
Depreciable value = $51,700 - $4,700 = $47,000
Depreciation expense per year = $47,000 / 5 = $9,400
