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Johnson, 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?

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 11, Problem 2EB
Textbook Problem
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Johnson, 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?

To determine

To compute:

The value of capitalize and expenses for the year by Company J.

Introduction:

When the cost is incurred to increase the value and the life of an asset, then it needs to be capitalized in the books of accounts and shown in the balance sheet and is depreciated over the years.

Explanation of Solution

Calculation of capitalized value for the year by Company J:

Particulars Amount($)
Machinery purchased for using a mortgage for finance 5,000,000
Add: Purchased a copyright 5,000
Paid cash for addition to an existing building 20,000
Paid cash for major repairs 110,000
Total capitalized value 5,135,000

Table (1)

Therefore, the capitalized value for the year by Company J is $5,135,000...

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Chapter 11 Solutions

Principles of Accounting Volume 1
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