QuestionCapital and Revenue Expenditures On August 7, Blue Ocean Inflatables Co. paid $\$ 2,800$ to install a hydraulic lift and $\$ 70$ 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. Aug. 7 $\begin{array}{l} \text { Delivery Truck } \\ \text { Cash }-\checkmark \\ \square \end{array}$ Foodard Chod My Wark
Journalize the entry for the air filter expenditures, If an amount box does not require an entry, leave it blank. Aug. 7 $\square$ $\square$ $\square$ $\square$ $\square$ $\square$

Studdy Solution

STEP 1

What is this asking? We need to record the purchase of a new hydraulic lift and an air filter for a delivery truck, figuring out which purchase goes where. Watch out! Don't mix up capital expenditures (long-term improvements) and revenue expenditures (day-to-day maintenance).

STEP 2

1. Categorize the lift
2. Journalize the lift
3. Categorize the air filter
4. Journalize the air filter

STEP 3

A hydraulic lift is a major improvement to the truck, making it more useful and likely lasting for a long time.
This makes it a capital expenditure, which increases the value of the truck asset.

STEP 4

We increase the Delivery Truck account by the cost of the lift, which is $\$2,800$ .
This shows the increased value of the truck.

STEP 5

We decrease the Cash account by $\$2,800$ because we paid for the lift with cash.

STEP 6

The journal entry looks like this: Aug. 7 $\begin{array}{lr} \text{Delivery Truck} & \$2,800 \\ \text{Cash} & \$2,800 \\ \end{array}$

STEP 7

An air filter is a routine replacement, keeping the truck in good working order but not fundamentally changing or improving it.
This is a revenue expenditure, which is an expense that keeps the business running.

STEP 8

We increase the Repairs and Maintenance Expense account by the cost of the filter, $\$70$ , to show the cost of maintaining the truck.

STEP 9

We decrease the Cash account by $\$70$ because we paid for the filter with cash.

STEP 10

The journal entry looks like this: Aug. 7 $\begin{array}{lr} \text{Repairs and Maintenance Expense} & \$70 \\ \text{Cash} & \$70 \\ \end{array}$

STEP 11

The hydraulic lift entry: Aug. 7 $\begin{array}{lr} \text{Delivery Truck} & \$2,800 \\ \text{Cash} & \$2,800 \\ \end{array}$ The air filter entry: Aug. 7 $\begin{array}{l l} \text{Repairs and Maintenance Expense} & \$70 \\ \text{Cash} & \$70 \\ \end{array}$

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Studdy Solution

STEP 1

What is this asking? We need to record the purchase of a new hydraulic lift and an air filter for a delivery truck, figuring out which purchase goes where. Watch out! Don't mix up capital expenditures (long-term improvements) and revenue expenditures (day-to-day maintenance).

STEP 2

1. Categorize the lift
2. Journalize the lift
3. Categorize the air filter
4. Journalize the air filter

STEP 3

A hydraulic lift is a major improvement to the truck, making it more useful and likely lasting for a long time.
This makes it a capital expenditure, which increases the value of the truck asset.

STEP 4

We increase the Delivery Truck account by the cost of the lift, which is $\$2,800$ .
This shows the increased value of the truck.

STEP 5

We decrease the Cash account by $\$2,800$ because we paid for the lift with cash.

STEP 6

The journal entry looks like this: Aug. 7 $\begin{array}{lr} \text{Delivery Truck} & \$2,800 \\ \text{Cash} & \$2,800 \\ \end{array}$

STEP 7

An air filter is a routine replacement, keeping the truck in good working order but not fundamentally changing or improving it.
This is a revenue expenditure, which is an expense that keeps the business running.

STEP 8

We increase the Repairs and Maintenance Expense account by the cost of the filter, $\$70$ , to show the cost of maintaining the truck.

STEP 9

We decrease the Cash account by $\$70$ because we paid for the filter with cash.

STEP 10

The journal entry looks like this: Aug. 7 $\begin{array}{lr} \text{Repairs and Maintenance Expense} & \$70 \\ \text{Cash} & \$70 \\ \end{array}$

STEP 11

The hydraulic lift entry: Aug. 7 $\begin{array}{lr} \text{Delivery Truck} & \$2,800 \\ \text{Cash} & \$2,800 \\ \end{array}$ The air filter entry: Aug. 7 $\begin{array}{l l} \text{Repairs and Maintenance Expense} & \$70 \\ \text{Cash} & \$70 \\ \end{array}$

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Studdy Solution

STEP 1

What is this asking? We need to record the purchase of a new hydraulic lift and an air filter for a delivery truck, figuring out which purchase goes where. Watch out! Don't mix up capital expenditures (long-term improvements) and revenue expenditures (day-to-day maintenance).

STEP 2

1. Categorize the lift2. Journalize the lift3. Categorize the air filter4. Journalize the air filter

STEP 3

A hydraulic lift is a **major improvement** to the truck, making it more useful and likely lasting for a long time.This makes it a *capital expenditure*, which increases the value of the truck asset.

STEP 4

We **increase** the *Delivery Truck* account by the cost of the lift, which is $2,800\$2,800$2,800.This shows the increased value of the truck.

STEP 5

We **decrease** the *Cash* account by $2,800\$2,800$2,800 because we paid for the lift with cash.

STEP 6

The journal entry looks like this: Aug. 7 Delivery Truck$2,800Cash$2,800\begin{array}{lr} \text{Delivery Truck} & \$2,800 \\ \text{Cash} & \$2,800 \\ \end{array}Delivery TruckCash​$2,800$2,800​

STEP 7

An air filter is a **routine replacement**, keeping the truck in good working order but not fundamentally changing or improving it.This is a *revenue expenditure*, which is an expense that keeps the business running.

STEP 8

We **increase** the *Repairs and Maintenance Expense* account by the cost of the filter, $70\$70$70, to show the cost of maintaining the truck.

STEP 9

We **decrease** the *Cash* account by $70\$70$70 because we paid for the filter with cash.

STEP 10

The journal entry looks like this: Aug. 7 Repairs and Maintenance Expense$70Cash$70\begin{array}{lr} \text{Repairs and Maintenance Expense} & \$70 \\ \text{Cash} & \$70 \\ \end{array}Repairs and Maintenance ExpenseCash​$70$70​

STEP 11

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1. Categorize the lift
2. Journalize the lift
3. Categorize the air filter
4. Journalize the air filter

A hydraulic lift is a major improvement to the truck, making it more useful and likely lasting for a long time.
This makes it a capital expenditure, which increases the value of the truck asset.

We increase the Delivery Truck account by the cost of the lift, which is $\$2,800$ .
This shows the increased value of the truck.

We decrease the Cash account by $\$2,800$ because we paid for the lift with cash.

The journal entry looks like this: Aug. 7 $\begin{array}{lr} \text{Delivery Truck} & \$2,800 \\ \text{Cash} & \$2,800 \\ \end{array}$

An air filter is a routine replacement, keeping the truck in good working order but not fundamentally changing or improving it.
This is a revenue expenditure, which is an expense that keeps the business running.

We increase the Repairs and Maintenance Expense account by the cost of the filter, $\$70$ , to show the cost of maintaining the truck.

We decrease the Cash account by $\$70$ because we paid for the filter with cash.

The journal entry looks like this: Aug. 7 $\begin{array}{lr} \text{Repairs and Maintenance Expense} & \$70 \\ \text{Cash} & \$70 \\ \end{array}$