ABC Ltd. Incurred the following costs related to the purchase of a machine: Invoice price Insurance during transit Pouring cement slab on which the machine must be mounted Interest expense on debt used to buy the asset Shipping costs Annual service contract cost $14,600 60 $12,100 $11,800 $10,500 What is the amount capitalized to the balance sheet for the machine? $13,600 200 1,000 2,500 100 300

ABC Ltd. Incurred the following costs related to the purchase of a machine: Invoice price Insurance during transit Pouring cement slab on which the machine must be mounted Interest expense on debt used to buy the asset Shipping costs Annual service contract cost $14,600 60 $12,100 $11,800 $10,500 What is the amount capitalized to the balance sheet for the machine? $13,600 200 1,000 2,500 100 300

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4PB: During the current year, Arkells Inc. made the following expenditures relating to plant machinery. ...

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For each of the following transactions, state whether the cost would be capitalized (C) or recorded as an expense (E). A. Purchased a machine, $100,000; gave long-term note B. Paid $600 for ordinary repairs C. Purchased a patent for $45,300 cash D. Paid $200,000 cash for addition to old building E. Paid $20,000 for monthly salaries F. Paid $250 for routine maintenance G. Paid $16,000 for major repairs
Garcia Co. owns equipment that costs $76,800, with accumulated depreciation of $40,800. Garcia sells the equipment for cash. Record the journal entry for the sale of the equipment if Garcia were to sell the equipment for the following amounts: A. $47,000 cash B. $36,000 cash C. $31,000 cash
Prepare journal entries for the following transactions: a. A machine with a cost of 10,000 and accumulated depreciation of 8,000 was sold for 2,500. b. A machine with a cost of 10,000 and accumulated depreciation of 8,000 was traded for a new machine with a market value of 12,000. Cash of 9,500 was also paid.
Expenditures After Acquisition Listed below are several transactions: a. Paid $80 cash to replace a minor part of an air conditioning system. b. Paid $40,000 to fix structural damage to a building. c. Paid $8,000 for monthly salaries. d. Paid $12,000 to replace a manual cutting machine with a computer-controlled machine. e. Paid $1,000 related to the annual painting of a building. Required: Classify each transaction as either a revenue expenditure, a capital expenditure, or neither.
During the current year, Arkells Inc. made the following expenditures relating to plant machinery. Renovated seven machines for $250,000 to improve efficiency in production of their remaining useful life of eight years Low-cost repairs throughout the year totaled $79,000 Replaced a broken gear on a machine for $6,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?
The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.
Steele Corp. purchases equipment for $25,000. Regarding the purchase, Steele recorded the following transactions: Paid shipping of $1,000 Paid installation fees of $2,000 Pays annual maintenance cost of $200 Received a 5% discount on $25,000 sales price Determine the acquisition cost of the equipment.
Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. C. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
During the current fiscal year, Heinrich Corp. incurred the following costs related to property, plant, and equipment: Amount paid to the contractor for the building constructed P13,000,000 Building permit fee 120,000 Excavation cost 110,000 Architect fee 440,000 Interest that would have been earned had the money used during the period of construction been invested in the money market 330,000 Invoice cost of machine acquired, terms 3/10, n/30 6,500,000 Freight, unloading and delivery charges for machine acquired 100,000 Custom duties and other charges 270,000 Allowance and hotel accommodation, paid to foreign technicians during installation and test run of machine 520,000 Royalty payment on machines purchased (based on units produced and sold) 240,000 Cash paid for the purchase of land (none was allocated to old building) 10,000,000 Mortgage assumed on the land purchased 2,100,000 Realtor’s commission 650,000 Legal fees, realty taxes and documentation expenses 900,000 Amount…
During the fiscal year, ABC Company incurred the following costs related to property, plant and equipment: Amount paid to the contractor for the building constructed 12,000,000Building permit fee 120,000Excavation cost 110,000Architect fee 440,000Interest that would have been earned had the money used during theperiod of construction been invested in the money market 330,000Invoice cost of machine acquired, terms 8/10, n/30 6,500,000Freight, unloading and delivery charges for machine acquired 100,000Custom duties and other charges 270,000Allowance and hotel accommodation, paid to foreign techniciansduring installation and test run of machine 520,000Royalty payment on machines purchased (based on units producedand sold) 240,000Cash paid for the purchase of land (none was allocated to oldbuilding) 10,000,000Mortgage assumed on the land purchased 2,000,000Realtor’s commission 650,000Legal fees, realty taxes and documentation expenses 900,000Amount paid to relocate persons squatting on the…
Write CAPITALIZED if the subsequent cost incurred SHALL FORM PART of the carrying amount of the PPE or EXPENSED OUTRIGHT if the subsequent cost incurred SHALL NOT FORM PART of the carrying amount of the PPE. Rearranged the production PPEs in Factory B for P 400,000 to accommodate a newly purchased equipment that will make the production process faster and more efficient. Repaired one of the machineries for P 350,000 as part of factory’s annual examination. Repaired another machinery for P 275,000 to prolong its remaining useful life from five years to seven years. Replaced a significant part of a production equipment for P 900,000. The equipment has an original cost of P 4,000,000 and accumulated depreciation as of date P 1,000,000. The part replaced represented 20% of the carrying amount and it was sold for a very nominal amount.
ABC Corp entered into a contract to acquire a new machine for its factory. The machine, which had a cash price of P2,000,000 was paid as follows: Down payment P 400,000 Note payable in 3 equal annual installments 1,200,000 20,000 shares of ABC, fair value of P40 per share 800,000 TOTAL 2,400,000 Prior to the machine’s use, installation cost of P50,000 was incurred. The machine has a residual value of P100,000. required: What is the cost of the machine for financial reporting purposes?