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Bill’s Wrecker Service has just completed a minor repair on a tow truck. The repair cost was $1,550, and the book value prior to the repair was $6,500. In addition, the company spent $12,000 to replace the roof on a building. The new roof extended the life of the building by five years. Prior to the roof replacement, the general ledger reflected the Building account at $85,000 and related Accumulated Depreciation account at $32,000. Required : After the work was completed, what book value should appear on the balance sheet for the tow truck and the building?

Answer :

Tow Truck = $6,500 Building = $65,000

abiolataiwo2015

The book value that should appear on the balance sheet for the tow truck and the building is:

  • Tow truck $6,500
  • Building $65,000

Tow truck amount of $6,500 will be expensed because it was stated that the truck repair was minor repair while the building amount of $65,000 will be capitalized because the roof increase the life of the building.

Calculation for building

Building=$85,000+$32,000-$12,000

Building=$65,000

Inconclusion the book value that should appear on the balance sheet for the tow truck and the building is:

  • Tow truck $6,500
  • Building $65,000

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