Question

Precision Construction entered into the following transactions during a recent year.

January 2 Purchased a bulldozer for $250,000 by paying $20,000 cash and signing a $230,000 note due in five years.
January 3 Replaced the steel tracks on the bulldozer at a cost of $20,000, purchased on account. The new steel tracks increase the bulldozer's operating efficiency.
January 30 Wrote a check for the amount owed on account for the work completed on
February 1 Replaced the seat on the bulldozer and wrote a check for the full $800 cost.
March 1 Paid $3,600 cash for the licensing rights to use computer software for a two-year period.

Required:
Prepare the journal entries for each of the above transactions.

Answer 1

Answer:

Jan-02

Dr Bulldozer $ 250,000

Cr Cash $ 20,000

Cr Note Payable $ 230,000

Jan-03

Dr Bulldozer $ 20,000

Cr Accounts Payable $ 20,000

Jan-30

Dr Accounts Payable $ 20,000

Cr Cash $ 20,000

Feb-01

Dr Repair and Maintenance Expense $ 800

Cr Cash $ 800

Mar-01

Dr Computer Software $ 3,600

Cr Cash $ 3,600

Explanation:

Preparation of the journal entries for each of the above transactions.

Jan-02

Dr Bulldozer $ 250,000

Cr Cash $ 20,000

Cr Note Payable $ 230,000

(Purchased bulldozer)

Jan-03

Dr Bulldozer $ 20,000

Cr Accounts Payable $ 20,000

(Replaced tracks on bulldozer)

Jan-30

Dr Accounts Payable $ 20,000

Cr Cash $ 20,000

(Paid cash)

Feb-01

Dr Repair and Maintenance Expense $ 800

Cr Cash $ 800

(Repaired seat of bulldozer)

Mar-01

Dr Computer Software $ 3,600

Cr Cash $ 3,600

(Purchase computer software)