Atlas Trucking Incurred the Following Costs During 2013

question 67

Essay

Atlas Trucking incurred the following costs during 2013:
1. Spent $15,000 on a major overhaul for a tractor-trailer rig. The overhaul is expected to increase the service life of the rig by three years.
2. Repaired the air-conditioning system for $3,000.
3. Rearranged and reconfigured the maintenance, loading, and unloading facilities at a cost of $75,000. The rearrangement is expected to result in substantial cost savings and increased efficiency over the next several years.
Required:
Prepare journal entries to record the above costs.

Understand the concept of comparative advantage and how it determines production specialization between countries or individuals.

Identify the relationship between opportunity costs and comparative advantage.

Distinguish between absolute and comparative advantage.

Recognize how specialization based on comparative advantage benefits trading partners.

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Definitions:

Call Provision

Gives the issuing corporation the right to call the bonds for redemption. The call provision generally states that if the bonds are called, the company must pay the bondholders an amount greater than the par value, a call premium. Most bonds contain a call provision.

Bondholders

Investors or entities that hold bonds issued by corporations or governments, entitled to receive the bond's face value and interest payments.

Principal Amount

The principal amount is the original sum of money borrowed in a loan or the initial amount invested, excluding any interest or profits.

Floating-Rate Bonds

Bonds whose coupon payment may vary over time. The coupon rate is usually linked to the rate on some other security, such as a government bond, or to some other rate, such as the prime rate or LIBOR.