Math Snap

STEP 1

What is this asking?
We need to record the purchase of a hydraulic lift and an air filter for a delivery truck, figuring out which one is a capital expenditure (an upgrade) and which one is a repair.
Watch out!
Don't mix up capital expenditures (which increase the value of an asset) and revenue expenditures (which are just regular maintenance).

STEP 2

1. Categorize the Expenditures
2. Journalize the Hydraulic Lift
3. Journalize the Air Filter

STEP 3

A hydraulic lift is a major upgrade!
It's a capital expenditure because it increases the value of the truck.
Think of it like adding a superpower to your delivery truck!

STEP 4

An air filter is routine maintenance.
It's a revenue expenditure because it just keeps the truck running as it should, not making it inherently more valuable.
It's like giving your truck a snack, not a whole new engine.

STEP 5

We increase the value of the Delivery Truck asset by the cost of the lift, which is $\$3,050$.

STEP 6

We decrease Cash by the same amount, $\$3,050$, because we paid for the lift.

STEP 7

So the journal entry on August 7th is:
\text{Delivery Truck} \quad \($\)3,050 \text{Cash} \quad \($\)3,050

STEP 8

The air filter is a repair expense, so we increase Repair and Maintenance Expense by the cost of the filter, which is $\$54$.

STEP 9

We decrease Cash by the same amount, $\$54$, since we paid for the filter.

STEP 10

So the journal entry on August 7th is:
\text{Repairs and Maintenance Expense} \quad \($\)54 \text{Cash} \quad \($\)54

Hydraulic Lift Entry:
Debit Delivery Truck $\$3,050$
Credit Cash $\$3,050$
Air Filter Entry:
Debit Repairs and Maintenance Expense $\$54$
Credit Cash $\$54$