Plant Assets, Natural Resources,
and Intangible Assets
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 10-1
All of the expenditures should be included in the cost of the
land. Therefore, the cost of the land is $61,000, or ($50,000 +
$3,000 + $2,500 + $2,000 + $3,500).
BRIEF EXERCISE 10-2
The cost of the truck is $26,900 (cash price $25,000 + sales tax
$1,500 + painting and lettering $400). The expenditures for
insurance and motor vehicle license should not be added to
the cost of the truck.
BRIEF EXERCISE 10-3
Depreciable cost of $34,000, or ($40,000 – $6,000). With a four-
year useful life, annual depreciation is $8,500, or ($34,000 ÷ 4).
Under the straight-line method, depreciation is the same each
year. Thus, depreciation is $8,500 for both the first and second
BRIEF EXERCISE 10-4
It is likely that management requested this accounting treatment
reported net income. Land is not depreciated; thus, by
reporting land at $80,000 above its actual value the company
increased yearly income by $4,000, or