Task: ASSET PURCHASES AND DISPOSITIONS
Problem 1. Wells Construction gave up a used crane and $16,000 cash for a similar new crane. The old crane cost $24,000, had $9,000 of accumulated depreciation, and a fair market value of $17,000. In recording this exchange, the new crane should be recorded at $_____________.
Problem 2. Brown Builders gave up a used diesel-powered electric generator and $5,000 cash for a new truck. The generator cost $17,000, had $10,000 of accumulated depreciation, and a fair market value of $6,000. In recording this exchange, the new truck should be recorded at $_____________.
Problem 3. Midwest Mining purchased an iron mine for $3,000,000. The mine was expected to produce 10,000,000 tons of ore over twenty years with no salvage value. During the first year, 500,000 tons of ore were mined and sold. Depletion expense for the first year is $_____________.
Problem 4. Morris Industries purchased equipment costing $40,000 on January 1, 2001. The equipment has a four year useful life, $8,000 salvage value, and is being depreciated using the straight-line method. It was sold at a $12,000 loss on June 30, 2003. The selling price of the equipment was $_____________.
Problem 5. Hi-Tech Corporation incurred $85,000 of research and development costs to produce a high technology solar computer, paid filing fees of $8,000 to register a patent on this product, and paid $43,000 to defend the patent against infringement by a competitor. All of these costs were incurred in 2001. Production of solar computers began on January 1, 2002. Assuming the patent has a useful life of 17 years, patent expense for 2002 is $_____________.