The following expenditures relating to plant assets were made by Newport Company
during the first 2 months of 2012.
1. Paid $7,000 of accrued taxes at the time the plant site was acquired.
2. Paid $200 insurance to cover a possible accident loss on new factory machinery while
the machinery was in transit.
3. Paid $850 sales taxes on a new delivery truck.
4. Paid $21,000 for parking lots and driveways on the new plant site.
5. Paid $250 to have the company name and slogan painted on the new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for a 1-year accident insurance policy on the new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
(a) Explain the application of the cost principle in determining the acquisition
cost of plant assets.
(b) List the numbers of the transactions, and opposite each indicate the account title to
which each expenditure should be debited.
Kemp Co. has delivery equipment that cost $50,000 and has been depreciated
Record entries for the disposal under the following assumptions.
(a) It was scrapped as having no value.
(b) It was sold for $37,000.
(c) It was sold for $20,000.
Tobias Company reports the following information (in millions) during a recent
year: net sales, $11,408.5; net earnings, $264.8; total assets, ending, $4,312.6; and total
assets, beginning, $4,254.3.
(a) Calculate the (1) return on assets, (2) asset turnover, and (3) profit margin ratios.
(b) Prove mathematically how the profit margin and asset turnover ratios work together
to explain return on assets, by showing the appropriate calculation.
(c) Tobias Company owns Villas (grocery), Tobias Theaters, Kurt Drugstores, and Cepeda