Travis Dorso-Unit 4

# Travis Dorso-Unit 4 - Problem 8.6 Cost of Assets,Subsequent...

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Unformatted text preview: Problem 8.6 Cost of Assets,Subsequent Book Values, and Balance Sheet Presentation 1) * Value of the truck at the time of purchase: \$14,000 + \$4,800 = \$18,800 *Value of the items purchased at auction at the time of purchase: Market value for all items purchased: \$200 + \$600 + \$2,400 = \$3,200 Paint trays and rollers (supplies): \$2,400(\$200/\$3,200) = \$150 Storage cabinets (office furniture): \$2,400(\$600/\$3,200) = \$450 Ladders and scaffolding (equipment): \$2,400(\$2,400/\$3,200) = \$1,800 *Book value of the truck: Cost of the truck \$12,000.00 Less depreciation at the time of purchase \$7,000.00 [= (\$12,000 - \$800)(5/8)] Book value \$5,000.00 2) *Depreciation of the truck: (\$18,800 - \$800)/4 years = \$4,500 *Depreciation of the items purchased at auction: paint trays and rollers (supplies): this is an expense this year: \$150 storage cabinets (office furniture): \$450/9 years = \$50 ladders and scaffolding (equipment): \$1,800/4 years = \$450 *Three-year license: (\$1,500/3 years)(11/12) = \$458.33 *Sale of the truck: depreciation: (\$11,200/8 years)(8/12) = \$933.33 loss on sale of the truck: \$5,000 - \$4,800 = (\$200) 3) Assets Three-year license \$1,041.67 [= \$1,500 - \$458.33] Property, plant, and equipment Truck \$18,800.00 Office furniture \$450.00 Equipment \$1,800.00 \$21,050.00 Less: accumulated depreciation (\$5,000.00) [= \$4,500 + \$50 + \$450] Property, plant, and equipment, net \$16,050.00 Exercise 8.13 Research Development and Patents a."Because of the difficulty in predicting future benefits, the FASB has ruled that firms are not allowed to treat research and development costs as assets; all such expenditures must be treated as expenses in the period incurred" (Porter and Norton, 2009, p. 381). The \$20,000 research and development costs should be presented as an expense on Erin's Income Statement. expenses in the period incurred" (Porter and Norton, 2009, p....
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Travis Dorso-Unit 4 - Problem 8.6 Cost of Assets,Subsequent...

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