New Asset Purchase
Self Storage purchased land, paying $150,000 cash as a down payment and signing a $200,000 note payable for the balance. Murphy paid $52,000 for a fence around the property, title insurance costing $5,000, and $3,000 for lighting of the grounds. It also had to pay delinquent property tax of $1,000, $11,000 for the company sign near the property entrance, and $10,000 to level the land and remove an unwanted building. What is the cost of the land?
$366,000
At the beginning of last year, Bratworth Corporation purchased a piece of heavy equipment for $99,000. The equipment has a life of five years. The estimated residual value is $9,000. Depreciation expense for year two using double-declining-balance (DDB) would be:
$23,760
On the first day of its fiscal year, Jewel-Towne Company purchased a new computer system for a total cost of $35,000. The computer system is expected to have a life of 5 years with a residual value of $6,500. If the company uses the double-declining-balance method, its depreciation expense for this computer system in the first year will be:
$14,000
Taylor Company purchased a machine for $9,800 on January 1, 2022. The machine has been depreciated using the straight-line method assuming it has a five-year life with a $1,400 residual value. Taylor sold the machine on January 1, 2024, for $7,600. What gain or loss should Taylor record on the sale?
A gain of $1,160
Which of the following items should be accounted for as a capital expenditure?
a) The monthly rental cost of an office building
b) Costs incurred to repair leaks in a building’s roof
c) Maintenance fees paid with funds provided by the company’s capital
d) Taxes paid in conjunction with the purchase of office equipment
d) Taxes paid in conjunction with the purchase of office equipment
Crater Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the land?
a) Brokerage commission paid to the real estate agent who handled the land transaction
b) Purchase price of the land
c) Cost of demolishing an old garage located on the land
d) Cost of a new parking lot constructed on the land
d) Cost of a new parking lot constructed on the land
At the beginning of last year, Bratworth Corporation purchased a piece of heavy equipment for $99,000. The equipment has a life of five years or 100,000 hours. The estimated residual value is $9,000. Bratworth used the equipment for 21,000 hours last year and 27,000 hours this year. Depreciation expense for year two using units-of-production methods would be:
$24,300
FlavorRite purchased a used van for use in its business on January 1, 2023. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite expects to drive the van 16,000 miles during 2023, 19,000 miles during 2024, 17,000 miles in 2025, and 48,000 miles in 2026, for total expected miles of 100,000. Calculate depreciation expense for 2024 (the second year) using the straight-line method.
$3,900
Gagnon Excavating purchased a used dump truck for $115,000 on January 1, 2024. The company has depreciated the dump truck using the straight-line method over its estimated 10-year life with a $5,500 residual value. Gagnon sold the dump truck on January 1, 2027, for $95,000. Total accumulated depreciation on the dump truck on the date of sale was $32,850. What gain or loss should be recorded on the sale?
Gain of $12,850
Which of the following items should be accounted for as a capital expenditure?
a) Constructed a new parking lot on leased property for $300,000.
b) Paid property taxes of $75,000 for the first year a new administrative services building was occupied.
c) Paid dividends of $40,000.
d) Repaired plumbing in existing manufacturing plant, paying $27,000.
a) Constructed a new parking lot on leased property for $300,000.
Cole Company purchased a building and land for $540,000 in total. Individually, the land appraised for $168,000 and the building appraised for $392,000. How much of the purchase price should be allocated to the cost of the land?
$162,000
Taylor Company purchased a machine for $9,800 on January 1, 2022. The machine has been depreciated using the straight-line method assuming it has a five-year life with a $1,400 residual value. Taylor sold the machine on January 1, 2024, for $7,600. What is the book value of the machine on December 31, 2023?
$6,440
FlavorRite purchased a used van for use in its business on January 1, 2023. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite expects to drive the van 16,000 miles during 2023, 19,000 miles during 2024, 17,000 miles in 2025, and 48,000 miles in 2026, for total expected miles of 100,000. Calculate depreciation expense for 2024 (the second year) using the double-declining balance method.
$4,250
On January 1, 2023, Novak Manufacturing purchased a machine for $810,000 that it expected to have a useful life of four years. The company estimated that the residual value of the machine was $50,000. Novak Manufacturing used the machine for two years and sold it on January 1, 2025, for $350,000. As of December 31, 2024, the accumulated depreciation on the machine was $380,000. What gain or loss should be recorded on the sale?
Loss on sale $80,000
Which of the following items should NOT be accounted for as a capital expenditure?
a) Paid interest on a six-month note payable that financed the construction of a new plant building, $550,000.
b) Purchased equipment for a new manufacturing plant, $6,000,000.
c) Paid $90,000 for the installation of the new equipment.
d) Paid maintenance costs of $31,000 on the equipment during its first year of use.
d) Paid maintenance costs of $31,000 on the equipment during its first year of use.
Lexington Garden Supply pays $280,000 for a group purchase of land, building, and equipment. At the time of acquisition, the land has a current market value of $124,000, the building’s current market value is $31,000, and the equipment’s current market value is $155,000. The business signs a note payable for the purchase price. Determine how to allocate the purchase price of $280,000, and then journalize the lump-sum purchase of the three assets.
Land 112,000
Building 28,000
Equipment 140,000
Note Payable 280,000
Greenland Company purchased a delivery van for $60,000 on January 1. The van has an estimated 4-year life with a residual value of $4,000. What would the depreciation expense for this van be in the first year if Greenland uses the straight-line method?
$14,000
FlavorRite purchased a used van for use in its business on January 1, 2023. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite expects to drive the van 16,000 miles during 2023, 19,000 miles during 2024, 17,000 miles in 2025, and 48,000 miles in 2026, for total expected miles of 100,000. Calculate depreciation expense for 2024 using units of production.
$2,964
FlavorRite purchased a used van for use in its business on January 1, 2023. It paid $17,000 for the van. FlavorRite expects the van to have a useful life of four years, with an estimated residual value of $1,400. FlavorRite sells the van for $15,000 at the end of 2024 when the accumulated depreciation on the van is $3,500. What gain or loss should be recorded on the sale?
Gain on sale $1,500
Lime (formerly known as LimeBike), located in San Mateo, California, is a startup founded in 2017. Its mission is to make shared bicycles accessible and affordable. Which of the following items should be accounted for as a capital expenditure by Lime?
a) Customized bikes from Trek and Specialized
b) Development costs of Lime’s app for locating, paying, and returning bikes
c) Salary of the salesperson who works to get cities to adopt Lime’s program
d) Replacement tires for bikes
a) Customized bikes from Trek and Specialized
Kipple Corporation purchased a forklift for $50,000 on July 1. The forklift has an estimated useful life of 30,000 usage hours with a residual value of $2,000. Kipple uses the units-of-production method for depreciation. If Kipple uses the forklift for 7,000 hours during the first year, the depreciation expense on the forklift would be:
$11,200
At the beginning of last year, Bratworth Corporation purchased a piece of heavy equipment for $99,000. The equipment has a life of five years. The estimated residual value is $9,000. Depreciation expense for year two using straight-line depreciation would be:
$18,000