QuestionCapital and Revenue Expenditures On August 7, GTS Co. paid $\$ 3,050$ to install a hydraulic lift and $\$ 54$ for an air filter for one of its delivery trucks. Journalize the entry for the new lift. If an amount box does not require an entry, leave it blank. August 7
Foodrack $\qquad$ Chack My Wark Capital expenditures that improve an asset are recorded as an increase to a fixed asset account.
Journalize the entry for air filter expenditures. If an amount box does not requre an entry, leave it blank. August 7 $\qquad$ $\square$ $\square$ Cash $*$ $\square$ $\square$

Studdy Solution

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: $\text{Repairs and Maintenance Expense} \quad \$54$ $\text{Cash} \quad \$54$

STEP 11

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

Was this helpful?

Studdy Solution

STEP 1

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: $\text{Repairs and Maintenance Expense} \quad \$54$ $\text{Cash} \quad \$54$

STEP 11

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

Get Studdy

Studdy solves anything!

Start learning now

Download Studdy AI Tutor now. Learn with ease and get all help you need to be successful at school.

Studdy Solution

STEP 1

STEP 2

1. Categorize the Expenditures2. Journalize the Hydraulic Lift3. 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\$3,050$3,050.

STEP 6

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

STEP 7

So the journal entry on August 7th is: Delivery Truck$3,050\text{Delivery Truck} \quad \$3,050Delivery Truck$3,050 Cash$3,050\text{Cash} \quad \$3,050Cash$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\$54$54.

STEP 9

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

STEP 10

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

STEP 11

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

Get Studdy

Studdy solves anything!

Start learning now

Download Studdy AI Tutor now. Learn with ease and get all help you need to be successful at school.

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

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!

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.

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

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

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

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

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

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 $\$54$