Communication Godwin Co. owns three delivery trucks. Details for each truck at the end of the most recent year follow: Age Expected Useful Life Initial Cost Accumulated Depreciation Truck 1 3 6 $22,500 $11,250 Truck 2 5 6 26,250 21,875 Truck 3 2 6 28,500 9,500 At the beginning of the year, a hydraulic lift is added to Truck 1 at a cost of $4,500. The addition of the hydraulic lift will allow the company to deliver much larger objects than could previously be delivered. At the beginning of the year, the engine of Truck 2 is overhauled at a cost of $5,000. The engine overhaul will extend the truck’s useful life by three years. Write a short memo to Godwin’s chief financial officer explaining the financial statement effects of the expenditures associated with Trucks 1 and 2.

BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 9, Problem 9.3TIF
Textbook Problem

Communication

Godwin Co. owns three delivery trucks. Details for each truck at the end of the most recent year follow:

  Age Expected Useful Life Initial Cost

Accumulated

Depreciation

Truck 1 3 6 $22,500 $11,250
Truck 2 5 6 26,250 21,875
Truck 3 2 6 28,500 9,500
  • At the beginning of the year, a hydraulic lift is added to Truck 1 at a cost of $4,500. The addition of the hydraulic lift will allow the company to deliver much larger objects than could previously be delivered.
  • At the beginning of the year, the engine of Truck 2 is overhauled at a cost of $5,000. The engine overhaul will extend the truck’s useful life by three years.

Write a short memo to Godwin’s chief financial officer explaining the financial statement effects of the expenditures associated with Trucks 1 and 2.

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Chapter 9 Solutions

Corporate Financial Accounting
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