Concept explainers
(a)
Cost concept: This is an accounting concept which states that the actual cost paid in receipt of the asset is the reliable measure and hence assets and services should be recorded at actual cost or historical cost.
To indicate: If the amount at which the land is recorded should be changed according to the appraised value of land
(b)
To indicate: The effect of sale of land for $2,125,000, on the
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- Capstone Consulting Services acquired land 5 years ago for $200,000. Capstone recently signed an agreement to sell the land for $375,000. In accordance with the sales agreenwnt, the buyer transferred $375,000 to Capstone’s bank account on February 20. How would elements of the accounting equation be affected by the sale?arrow_forwardJada Company had the following transactions during the year: Purchased a machine for $500,000 using a long-term note to finance it Paid $500 for ordinary repair Purchased a patent for $45,000 cash Paid $200,000 cash for addition to an existing building Paid $60,000 for monthly salaries Paid $250 for routine maintenance on equipment Paid $10,000 for extraordinary repairs If all transactions were recorded properly, what amount did Jada capitalize for the year, and what amount did Jada expense for the year?arrow_forwardJohnson, Incorporated, had the following transactions during the year: Purchased a building for $5,000,000 using a mortgage for financing Paid $2,000 for ordinary repair on a piece of equipment Sold product on account to customers for $1,500,600 Paid $20,000 cash to add a storage shed in the corner of an existing building Paid $360,000 in monthly salaries Paid $25,000 for routine maintenance on equipment Paid $110,000 for extraordinary repairs Depreciation expense recorded for the year is $15,000. If all transactions were recorded properly, what is the amount of increase to the Property, Plant, and Equipment section of Johnsons balance sheet resulting from this years transactions? What amount did Johnson report on the income statement for expenses for the year?arrow_forward
- Cox Construction, a company in its 10th year of business, purchased a piece of equipment on April 1, year 9, for 20,000. Cox has used it for business purposes since the initial purchase date. The company depreciated the equipment using the MACRS half-year table for 5-year assets. For tax purposes, what is the amount of accumulated depreciation expense for the equipment as of December 31, year 10? a. 6,000 b. 10,400 c. 11,600 d. 12,800arrow_forwardJohnson, Incorporated had the following transactions during the year: Purchased a building for $5,000,000 using a mortgage for financing Paid $2,000 for ordinary repair on a piece of equipment Sold product on account to customers for $1,500,600 Purchased a copyright for $5,000 cash Paid $20,000 cash to add a storage shed in the corner of an existing building Paid $360,000 in monthly salaries Paid $25,000 for routine maintenance on equipment Paid $110,000 for major repairs If all transactions were recorded properly, what amount did Johnson capitalize for the year, and what amount did Johnson expense for the year?arrow_forwardFor 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 repairsarrow_forward
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