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10 - Class Exercises (with solutions)

# 10 - Class Exercises (with solutions) - ACC211 NVCC...

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ACC211 NVCC Annandale Mitchell Chapter 10 Class Exercises SOLUTIONS IN RED 1. The following expenditures were incurred by Nationals Company in purchasing land: cash price \$69,090, accrued taxes \$2,492, attorneys' fees \$2,556, real estate broker's commission \$2,064, and clearing and grading \$3,447. What is the cost of the land? All of the expenditures should be included in the cost of the land. Therefore, the cost of the land is \$79,649 , or (\$69,090 + \$2,492 + \$2,556 + \$2,064 + \$3,447). 2. Braves Company acquires a delivery truck at a cost of \$55,600. The truck is expected to have a salvage value of \$3,700 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method. Depreciable cost of \$51,900, or (\$55,600 - \$3,700). With a 4-year useful life, annual depreciation is \$12,975, or (\$51,900 ÷ 4). Under the straight-line method, depreciation is the same each year. Thus, depreciation is \$12,975 for both the first and second years. 3. Lightning Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 155,160 miles. Taxi no. 10 cost \$39,920 and is expected to have a salvage value of \$310. Taxi no. 10 is driven 30,860 miles in year 1 and 20,020 miles in year 2. Compute the depreciation for each year. (Round depreciation cost per unit to 2 decimal places, e.g. 10.50. Use rounded numbers for future calculations. Round final answers to 0 decimal places, e.g. 125.) The depreciation cost per unit is \$0.26 cents per mile computed as follows: Depreciable cost (\$39,920 - \$310) ÷ 155,160 = \$0.26 Year 1 30,860 miles × \$0.26 = \$8,024 Year 2 20,020 miles × \$0.26 = \$5,205 4. Marlins Company sells office equipment on September 30, 2010, for \$20,258 cash. The office equipment originally cost \$72,059

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10 - Class Exercises (with solutions) - ACC211 NVCC...

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