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Exercises[1] - Plant Assets and Depreciation Exercises AC...

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AC 102 Professor George M. Brooker Exercises Plant Assets and Depreciation
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1.)Identify each of the following expenditures as chargeable to (a) Land, (b) Land Improvement, (c) Buildings, (d) Machinery and Equipment , or (e) other 1) Cost of paving parking area for employees and customers 2) Insurance during construction of building 3) Interest incurred on loan during construction of building 4) Fee paid for installation of equipment 5) Special foundation for new equipment acquired 6) Insurance on new equipment while in transit 7) Freight charges on new equipment 8) Cost of repairing vandalism damage to equipment during installation 9) Sales ax on new equipment 10) Cost incurred in repairing damage resulting from installation of new equipment 11) Cost of land fill for building site 12) Cost of lubricating oil purchased for periodic oil changes for equipment 13) Parking lot lighting 14) Installation of fence around the parking lot 15) Repainting the trim on a building 16) Special assessment paid to city for extension of water main to property 17) Cost of razing and removing the old building on property acquired for building site 18) Delinquent real estate taxes assumed by purchaser on property acquired for building site 19) Attorney’s fee for title search 20) Architect’s fee for building plans and supervision of construction
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7.)Equipment purchased at the beginning of the fiscal year for $185,000 is expected to have a useful life of 5 years, or 15,000 hours, and a residual value of $15,000. Compute the depreciation for the first and second years of use by each of the following methods a) Straight line b) Units-of-production (2,5000 hours first year, 3,250 hours second year) c) Declining-balance at twice the straight-line rate d) Sum of the years digits method (Round the answers to the nearest dollar) Solution
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14. Computer equipment (office equipment) purchased 6 ½ years ago for $250,000 with an estimated life of 8 years and a residual value of $10,000 is now sold for $60,000 cash. (Appropriate entries for depreciation had been made for the first six years of use.) Journalize the following entries: a) Record the depreciation for the one-half year prior to the sale, using the straight-line method. b) Record the sale of the equipment c) Assuming that the equipment had been sold for $50,000 cash, prepare the entries for (b) above to record the sale. Solution
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15. Machinery acquired at a cost of $100,000 and on which there is accumulated depreciation of $60,000 (including depreciation for the current year to date) is exchanged for similar machinery. For financial reporting purposes present entries to record the disposition of the old machinery and the acquisition of new machinery under each of the following assumptions: a) Price of new, $120,000; trade-in allowance of old, $4,000; balance paid in cash b) Price of new, $120,000; trade-in allowance of old, $44,000; balance paid in cash Solution 16.
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