Identify the following expenditures as capital expenditures or revenue expenditures. Immediately after acquiring a new delivery truck, paid$260 to have the name of the store and other advertising material painted on the vehicle. Painted delivery truck at a cost of $450 after two years of use. Purchased new battery at a c cost of $40 for two years old delivery truck

Identify the following expenditures as capital expenditures or revenue expenditures. Immediately after acquiring a new delivery truck, paid$260 to have the name of the store and other advertising material painted on the vehicle. Painted delivery truck at a cost of $450 after two years of use. Purchased new battery at a c cost of $40 for two years old delivery truck

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 22P

See similar textbooks

Similar questions

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?
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
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, two flight simulators were purchased by a space camp for 77,000 each with a salvage value of 5,000 each and estimated useful lives of eight years. On January 1, 20-2, the hydraulic system for Simulator A was replaced for 6,000 cash and an updated computer for more advanced students was installed in Simulator B for 9,000 cash. The hydraulic system is expected to extend the life of Simulator A three years beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Simulators A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each simulator for 20-2 through 20-8.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
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.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Grandorf Company replaced the engine in a truck for 8,000 and expects the new engine will extend the life of the truck two years beyond the original estimated life. Related information is provided below. Cost of truck 65,000 Salvage value 5,000 Original estimated life 6 years The truck was purchased on January 1, 20-1. The engine was replaced on January 1, 20-6. Using straight-line depreciation, compute depreciation expense for 20-6.
Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.
Capital versus Revenue Expenditures On January 1, 2014, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2016: â€¢ The building was painted at a cost of $5,000. â€¢ To prevent leaking, new windows were installed in the building at a cost of $10,000. â€¢ To improve production, a new conveyor system was installed at a cost of $40,000. â€¢ The delivery truck was repainted with a new company logo at a cost of $1,000. â€¢ To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000. â€¢ The trucks engine was overhauled at a cost of $4,000. Required Determine which of those costs should be capitalized. Also record the journal entry for the capitalized costs. Assume that all costs were incurred on January 1, 2016. Determine the amount of depreciation for the year 2016. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets. How would the assets appear on the balance sheet of December 31, 2016?
Identify the following expenditures as capital expenditures or revenue expenditures:a. Immediately after acquiring a new delivery truck, paid $195 to have the name of the store andother advertising material painted on the vehicle.b. Painted delivery truck at a cost of $450 after two years of use.c. Purchased new battery at a cost of $40 for two-year-old delivery truck.d. Installed an escalator at a cost of $17,500 in a three-story building that had been used for someyears without elevators or escalators.e. Purchased a pencil sharpener at a cost of $15.00. f. Original life of the delivery truck had been estimated at four years, and straight-line deprecia-tion of 25 percent yearly had been recognized. After three years’ use, however, it was decided to recondition the truck thoroughly, including adding a new engine.
New energy-efficient windows were installed for a total cost of $375,000. The company received a government grant, in the form of cashback for 15% of the total cost. The windows have a 15-year useful life and are depreciated on a straight-line basis. Prepare the journal entries required in the year of purchase using the: 1) Net method 2) Deferral method