Assignment
I. Mama Company incurred the following costs.
|
1. Sales tax on factory machinery purchased
|
$ 5.000
|
|
2. Painting of and lettering on truck immediately upon purchase
|
700
|
|
3. Installation and testing of factory machinery
|
2,000
|
|
4. Real estate broker's commission on land purchased
|
3,500
|
|
5. Insurance premium paid for first year's insurance on new truck
|
880
|
|
6. Cost of landscaping on property purchased
|
7,200
|
|
7. Cost of paving parking lot for new building constructed
|
17,900
|
|
8. Cost of clearing, draining, and filling land
|
13,300
|
|
9. Architect's fees on self-constructed building
|
10,000
|
Instructions
Indicate to which account Adama would debit each of the costs.
II. On March 1, 2017, Boyd Company acquired real estate, on which it planned to con¬struct a small office building, by paying $80,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,900 attorneys fee for work concern¬ing the land purchase, $5,200 real estate broker's fee, $9,100 architect's fee, and $14,000 to put in driveways and a parking lot.
Instructions
(a) Determine the amount to be reported as the cost of the land.
(b) For each cost not used in part (a), indicate the account to be debited.
III. Gotham Company purchased a new machine on October I, 2017, at a cost of $90,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 70,000 working hours during its 8-year life.
Instructions
Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a December 31 year-end.
IV. Whippet Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2017, at a cost of $100,000. Over its 4-year useful life, the bus is expected to be driven 160,000 miles. Salvage value is expected to be $8,000.
Instructions
(a) Compute the depreciation cost per unit.
(b) Prepare a depreciation schedule assuming actual mileage was 2017, 40,000; 2018, 52,000; 2019, 41,000; and 2020, 27,000.
V. Basic information relating to a new machine purchased by Gotham Company is presented in E9-5.
Instructions
Using the facts presented in E9-5, compute depreciation using the following methods in the year indicated.
(a) Declining-balance using double the straight-line rate for 2017 and 2018.
(b) Units-of-activity for 2017, assuming machine usage was 480 hours. (Round deprecia¬tion per unit to the nearest cent.)