Exercise 6-4A (Static) Determining the cost of an asset LO 6-1Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $140,000. The selleragreed to allow a 4 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight costamounted to $1.200. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $1,800. The loaderoperator is paid an annual salary of $60,000. The cost of the company's theft insurance policy increased by $800 per year as a resultof acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,000.RequiredDetermine the amount to be capitalized in the asset account for the purchase of the front-end loader. (Amounts to be deductedshould be indicated with minus sign.)Costs that are to be capitalizedList priceTotal costs Exercise 6-4A (Static) Determining the cost of an asset LO 6-1Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $140,000. The selleragreed to allow a 4 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight costamounted to $1.200. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $1,800. The loaderoperator is paid an annual salary of $60,000. The cost of the company's theft insurance policy increased by $800 per year as a resultof acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,000.RequiredDetermine the amount to be capitalized in the asset account for the purchase of the front-end loader. (Amounts to be deductedshould be indicated with minus sign.)Costs that are to be capitalizedList priceTotal costs

Capitalized cost refers to the cost of an asset that a company capitalizes, or records as an asset…

Exercise 6-4A (Static) Determining the cost of an asset LO 6-1 Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $140,000. The seller agreed to allow a 4 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $1.200. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $1,800. The loader operator is paid an annual salary of $60,000. The cost of the company's theft insurance policy increased by $800 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,000. Required Determine the amount to be capitalized in the asset account for the purchase of the front-end loader. (Amounts to be deducted should be indicated with minus sign.) Costs that are to be capitalized List price

Exercise 6-4A (Static) Determining the cost of an asset LO 6-1 Southwest Milling Co. purchased a front-end loader to move stacks of lumber. The loader had a list price of $140,000. The seller agreed to allow a 4 percent discount because Southwest Milling paid cash. Delivery terms were FOB shipping point. Freight cost amounted to $1.200. Southwest Milling had to hire a specialist to calibrate the loader. The specialist's fee was $1,800. The loader operator is paid an annual salary of $60,000. The cost of the company's theft insurance policy increased by $800 per year as a result of acquiring the loader. The loader had a four-year useful life and an expected salvage value of $6,000. Required Determine the amount to be capitalized in the asset account for the purchase of the front-end loader. (Amounts to be deducted should be indicated with minus sign.) Costs that are to be capitalized List price

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 44E: Cost of a Fixed Asset Colson Photography Service purchased a new digital imaging machine on April 15...

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Cost of a Fixed Asset Colson Photography Service purchased a new digital imaging machine on April 15 for $11,200. During installation Colson incurred and paid in cash the following costs: Colson also paid $160 to replace a bracket on the digital imager that was damaged when one of Colsons employees dropped a box on it while it was being installed. Required: 1. Determine the cost of the digital imaging machine. 2. CONCEPTUAL CONNECTION Explain why you included or excluded the $160 bracket replacement cost.
Allocating payments and receipts to fixed asset accounts The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search 3,600 b. Cost of real estate acquired as a plant site: Land 720,000 Building (to be demolished) 60,000 c. Finders fee paid to real estate agency 23,400 d. Delinquent real estate taxes on property, assumed by purchaser 15,000 e. Architects and engineers fees for plans for new building 75,000 f. Cost of removing building purchased with land in (b) 10,000 g. Proceeds from sale of salvage materials from old building 3,400 h. Cost of filling and grading land 18,000 i. Premium on one-year insurance policy during construction. 8,400 j. Money borrowed to pay building contractor 800,000 k. Special assessment paid to city for extension of water main to the property 13,400 1. Cost of repairing windstorm damage during construction 3,000 m. Cost of repairing vandalism damage during construction 2,000 n. Cost of trees and shrubbery planted 14,000 o. Cost of paving parking lot to be used by customers 21,600 p. Interest incurred on building loan during construction 40,000 q. Proceeds from insurance company for windstorm and vandalism damage 4,500 r. Payment to building contractor for new building 800,000 s. Refund of premium on insurance policy (i) canceled after 10 months 1,400 Instructions 1.Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item Land Land Improvements Building Other Accounts 2.Determine the amount debited to Land, Land Improvements, and Building. 3.The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. 4.What would be the effect on the current years income statement and balance sheet if the cost o f paving the parking lot o f 21,600 [payment (o)] was incorrectly classified as Land rather than Land Improvements? Assume that Land Improvements are depreciated over a 10-year life using the double-declining-balance method.
Allocating payments and receipts to fixed asset accounts The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search 2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of tearing down and removing building acquired In (b) 5,000 e. Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 g. Architects and engineers fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 i. Cost of filling and grading land 12,000 j. Money borrowed to pay building contractor 900,000 k. Cost of repairing windstorm damage during construction 5,500 1. Cost of paving parking lot to be used by customers 32,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 2,000 o. Cost of repairing vandalism damage during construction 2,500 p. Proceeds from insurance company for windstorm and vandalism damage 7,500 q. Payment to building contractor for new building 800,000 r. Interest incurred on building loan during construction 34,500 s. Refund of premium on insurance policy (h) canceled after 11 months 500 Instructions 1.Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item Land Land improvements Building Other Accounts 2.Determine the amount debited to Land, Land Improvements, and Building. 3.The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. 4.What would be the effect on the current years income statement and balance sheet if the cost of filling and grading land of 12,000 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume that Land Improvements are depreciated over a 20-year life using the double-declining-balance method.
Effect of depreciation on net income Tuttle Construction Co. specializes in building replicas of historic houses. Tim Newman, president of Tuttle Construction, is considering the purchase of various items of equipment on July 1, 2014, for 400,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Tim is considering depreciating the equipment, by the straight-line method. He discussed the matter with his CPA and learned that, although the straight-line method could be elected, it was to his advantage to use the Modified Accelerated Cost Recovery System (MACKS) for tax purposes, lie asked for your advice as to which method to use for tax purposes. 1. Compute depreciation for each of the years (2014, 2015, 2016, 2017, 2018, and 2019) of useful life by (a) the straight-line method and (b) MACRS. In using the straight-line method, one-half year's depreciation should be computed for 2014 and 2019.Use the MACRS rates presented in Exhibit 9. 2. Assuming that income before depreciation and income tax is estimated to be 750,000 uniformly per year and that the income tax rate is 40%, compute the net income for each of the years 2014, 2015, 2016, 2017, 2018, and 2019 if (a) the straight-line method is used and (b) MACRS is used. 3. What factors would you present for Tim's consideration in the selection of a depreciation method?
Required information Problem 8-6A Disposal of plant assets LO C1, P1, P2 Onslow Co. purchased a used machine for $240,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $28,800 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.
PARRISH 8 8-1 ACQUISITIONS OF ASSETS For the following asset plese identify the costs. For any costs that are not included in the asset cost, specify how they would be recorded. Invoice price $90,000 (2/10, n/30) Sales Tax 3,400 Freight to ship to Company 6,000 Transport to factory 1.900 Repair of chip in machine from damage in loading 500 Training of operators 3,600 Lunch for truck drivers in transit 25
MODULE 5 8-7 DISPOSAL OF ASSET Please read the problem below and provide the correct answer along with an explanation of the answer. Thank you! Dump It is selling a machine that no longer is large enough for the production requirements. Dump It has had the machien for 3 years and has depreicated it using the straightline method. Original cost had been $98,000 and salvage was estimated at $6000. The machine has a life of 8 years. a) Journalize the sale of the imagine $70,000 b) Journalize teh sale of the machine for $50,000
Exercise 10-1 Cost of plant assets LO C1 Rizio Co. purchases a machine for $10,900, terms 1/10, n/60, FOB shipping point. Rizio paid within the discount period and took the $109 discount. Transportation costs of $246 were paid by Rizio. The machine required mounting and power connections costing $754. Another $355 is paid to assemble the machine and $40 of materials are used to get it into operation. During installation, the machine was damaged and $220 worth of repairs were made. Complete the below table to calculate the cost recorded for this machine.
Exercise 10-1 (Algo) Cost of plant assets LO C1 Rizio Company purchases a machine for $13,400, terms 1/10, n/60, FOB shipping point. Rizio paid within the discount period and took the $134 discount. Transportation costs of $303 were paid by Rizio. The machine required mounting and power connections costing $926. Another $437 is paid to assemble the machine, and $40 of materials are used to get it into operation. During installation, the machine was damaged and $320 worth of repairs were made. Complete the below table to calculate the cost recorded for this machine.
Exercise 8-17 (Algo) Disposal of assets LO P2 Diaz Company owns a machine that cost $125,700 and has accumulated depreciation of $90,800. Prepare the entry to record the disposal of the machine on January 1 in each separate situation. 1. The machine needed extensive repairs and was not worth repairing. Diaz disposed of the machine, receiving nothing in return.2. Diaz sold the machine for $16,100 cash.3. Diaz sold the machine for $34,900 cash.4. Diaz sold the machine for $41,700 cash.
MODULE 5 8-5 USE OF ASSET Please read the following question and provide the correct answer and explain how you came to that answer. Thank you! Nerdz, Inc. has just acquired a new truck for use in the business. Cost of the truck was $40,000. Nerdz has determined that the life of the truck will be three years and no salvage. Depreciation is straight-line a) Journalize the entry to record the depreciation for the first year of asset's life b) Journalize the entry to record the depreciation for the first month of teh asset's life.
QUESTION FOUR Richy Limited has plant that cost R345 000 on 01 January 2016. Installation andmodification costs R69 000 (including vat). Transfer costs paid to lawyer amounted toR20 000. Transport costs for bringing the asset to location amounted to R20 000. Theplant was ready for use on 01 January 2016. The machines were cleaned on 01 March2016 at a cost of R10 000. Due to the low order levels in April 2016 the plant stood idle.Depreciation is provided over its useful life of 5 years using the straight-line method to anil residual value. Richy Limited measures plant under the revaluation model. The plant was revalued asfollows: 31 December 2016 R310 00031 December 2017 R300 00031 December 2018 R250 000 Richy Limited transfers the maximum amount from the realised portion of therevaluation surplus to equity. VAT must be calculated at 15%.Required:Disclose the above information in the notes to the financial statements for years ending2016, 2017 and 2018. (Include in you answer the…