9 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 9 EXERCISE...

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SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 9 EXERCISE 9-1A Note: There are many possibilities for answers to this question.  The  answers given are only a few examples of long-term operational assets  that these companies may own.  Also note that even though the  companies have very different business activities, they may have some of  the same kinds of long-term operational assets. Buildings, Office Equipment, Computer Equipment, Land,  Communication Equipment, etc. Caterpillar: Buildings, Land, Manufacturing Equipment, Office Equipment, etc. Amtrack: Transportation Equipment, Buildings, Land, Office Equipment, etc. Walt Disney: Buildings, Office Equipment, Amusement Buildings, Land and Equip- ment, etc. 9-8
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EXERCISE 9-2A Long-Term Operational Assets: a. No b. Yes c. Yes d. No e. No  (Even if it were for a period of one year or longer, it would be  classified as an investment.) f. Yes g. No h. Yes i. Yes  (If the company is in a business that uses or sells timber) j. Yes  (As long as it is not held for investment purposes) k. Yes l. Yes EXERCISE 9-3A No. Tangible (T), Intangible (I) a. Retail Store Building T b. Shelving for Inventory T c. Trademark I d. Gas Well T e. Drilling Rig T f. FCC License for TV Station I g. 18-Wheel Truck T h. Timber T i. Log Loader T j. Dental Chair T k. Goodwill I 9-9
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l. Business Web Page T EXERCISE 9-4A Costs that are to be capitalized: List Price $120,000 Less: Discount    (6,000)* Freight Cost      2,500 Platform      1,000 Total Costs $117,500 *$120,000 x 5% = $6,000 The operator salary and increase in insurance are operating expenses. EXERCISE 9-5A a.   Basket Purchase b. % of* Purchase Allocated Total Appraised Value App. Val.     Price         Cost      Land $   200,000 .20 x $900,000  = $180,000 Building   800,000 .80 x   900,000  =            720,000     Total $1,000,000 $900,000 *Land: $200,000  ÷  $1,000,000 = .20; Building: $800,000  ÷  $1,000,000 = .80 c. No, the historical cost concept requires that assets be recorded at  the amount paid for them. d. 9-10
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Balance Sheet Income Statement Statemt. of Assets = Liab . + S.  Equity Rev. - Exp. = Net Inc. Cash Flows Cash + Land + Bldg. = + (900,000) + 180,000 + 720,000 = NA + NA NA - NA = NA (900,000) IA 9-11
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EXERCISE 9-6A a. Asset Appraised Value Percent of Appraised Value Land $160,000 20% Building 400,000 50% Equipment 240,000 30% Total $800,000 100% Asset % of App. Value Purchase Price Allocated Cost Land 20% x $700,000 = $140,000 Building 50% x 700,000 = 350,000 Equipment 30% x 700,000 = 210,000 Total $700,000 b. Assets
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This note was uploaded on 04/10/2008 for the course ACCOUNTING 221 taught by Professor West during the Spring '08 term at UMass (Amherst).

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9 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 9 EXERCISE...

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