1. Determining Amount of PP&E to Capitalize Williams Corporation purchased an old building and the land on which it is located for $500,000. The old building will be demolished at a net cost of...

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1. Determining Amount of PP&E to Capitalize Williams Corporation purchased an old building and the land on which it is located for $500,000. The old building will be demolished at a net cost of $15,000. A new building will be built on the site. Williams also incurred the following costs: closing fees including commissions of $30,000, and title insurance costing $2,500. Williams assumed property taxes for the 6 months prior to the purchase totaling $10,000. Determine the amount Williams should capitalize for land and building related to the purchase. Total amount to capitalize for land- Total amount to capitalize for building - 2. Determining Costs in a Lump-Sum Acquisition Serena Inc. purchases land and a building for $500,000. An independent appraisal indicates that the land has a value of $80,000 and the building has a value of $450,000. Determine the amount Serena should capitalize for land and building related to the purchase. Note: Round your answers to the nearest whole dollar. 3. Recording a Lump-Sum Acquisition Freeman Company purchased a tract of land on which were located a warehouse and an office building. The cash purchase price was $140,000 plus $10,000 in fees connected with the purchase. The following information relates to the property. Tax AssessmentSeller’s Book ValueOriginal Cost Land$20,000$10,000$10,000 Warehouse40,00020,00060,000 Building60,00050,00080,000 Prepare the journal entry to record this purchase. Account NameDr.Cr. Land Warehouse Building Cash 4. Recording Asset Acquisition through Equity Venus Company issued 50 shares of its own $1 par common stock in exchange for equipment. The stock was actively traded for $50 a share, and the company’s management estimates that the equipment has a fair value at the date of acquisition of approximately $2,600. Prepare the journal entry to record the purchase. Note: Record the credit accounts in alphabetical order using the first letter of the account name. Account NameDr.Cr. 5. Recording Asset Acquisition through Debt Teslla Corporation purchased land by signing a note with the seller requiring $10,000 immediately and $28,000 three years from purchase. The note is noninterest-bearing, but the interest rate for similar land purchases with notes is 10%. Note: Round your final answers to the nearest whole dollar. a. Compute the value recorded in the Land account b. Compute the interest Teslla records for the first year of the note Recording Donated Assets Pitt Company received a vacant building as a donation. The building has an original cost of $200,000 on the donor’s books and was 25% depreciated. The building is appraised at $160,000. Record Pitt Company’s journal entry related to the donated building. Account NameDr.Cr. 6. Recording Donated Assets Pitt Company received a vacant building as a donation. The building has an original cost of $200,000 on the donor’s books and was 25% depreciated. The building is appraised at $160,000. Record Pitt Company’s journal entry related to the donated building. Account NameDr.Cr. 7. Calculating Actual Interest and Weighted Average Interest Rate Weighted average accumulated expenditures are $400,000 on a project for which work steadily progressed during the current year. The following debt was outstanding during the current year. Construction loan$100,000 at 10% Note payable$500,000 at 8% Mortgage payable$150,000 at 12% a. Compute the total actual interest expense for the current year. $___ b. Compute the weighted average interest rate on the general debt. Round percentages to two decimal places (for example, enter 2.05 for 2.04555%). ___% 8. Calculating Avoidable Interest Weighted average accumulated expenditures are $400,000 on a project for which work steadily progressed during the current year. The following debt was outstanding during the current year. Construction loan$100,000 at 10% Note payable$500,000 at 8% Mortgage payable$150,000 at 12% Calculate avoidable interest for the purpose of interest capitalization. Note: Round interest rate percentage used in your calculation to two decimal places (for example, enter 2.05 for 2.04555%). Avoidable interest$___ 9. Recording Asset Retirement Obligation Martina Company is in the first year of building a storage facility that will contain hazardous building materials. The company is required to remove the storage facility and dispose of its contents at the end of 10 years, which is the useful life of the facility. Martina estimates the dismantling and removal costs to be $120,000 in 10 years. Prepare the journal entry, if any, that is recorded in this first year relating to the restoration costs. The appropriate discount rate is 9%. Note: Round your answer to the nearest whole number. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). Account NameDr.Cr. 10. Recording a Lump-Sum Acquisition Tires Outlet purchases the following used items at an auction for $40,000 cash: a drill press, a lathe, and a heavy-duty air compressor. The equipment is in excellent condition except for the electric motor on the lathe, which will cost $900 to replace with a new motor. Tires Outlet determines that selling prices for the used items are as follows: drill press, $8,400; lathe with an operational motor, $24,000; and air compressor, $10,500. Prepare the entry to record (a) acquisition of the equipment and (b) replacement of the motor. Note: Round your final answers to the nearest whole number. Account Name Dr. Cr. (a)Equipment - Drill Press Equipment - Lathe Equipment - Compressor Cash (b) 11. Computing Gain or Loss on Disposal On July 1, one of Renee Company’s delivery vans was destroyed in an accident. On that date, the van’s carrying value was $5,000. On July 15, Renee received and recorded a $1,400 invoice for a new engine installed in the van earlier in May and another $1,000 invoice for various repairs done at the same time. In August, Renee received $7,000 from its insurance policy on the van; Renee plans to use those funds to replace the van. Compute the amount Renee reports as a gain or loss on disposal of the van in its income statement. Note: Do not use a negative sign in your answer. 12. Recording Gain or Loss on Disposal Edgewater Inc. purchased equipment on January 1, 2018, for $36,000. The equipment has an estimated salvage value of $3,000 and an estimated useful life of 8 years. The company depreciates the asset using the straight-line method. On May 30, 2020, Edgewater Inc. sold the equipment for $22,000. Note: Round your final answers below to the nearest whole number. a. Record the May 30, 2020, entry to update depreciation assuming that depreciation was last updated on December 31, 2019. DateAccount Name Dr. Cr. May 30 b. Record the May 30, 2020, entry for the sale of this equipment. Note: Record your debit accounts in alphabetical order using the first letter of the account name. DateAccount Name Dr. Cr. May 30 13. Computing Straight-Line Depreciation On January 1, 2020, equipment was purchased for $240,000. The company incurred installation costs of $600 and freight charges on delivery of $1,000. The equipment has a $20,000 residual value and an expected useful life of five years. a. Determine depreciation expense for 2020 using the straight-line depreciation method. $____ b. Answer part a, assuming that the appraised value of equipment is $185,000 on December 31, 2020? $____ 14. On January 1, 2020, equipment was purchased for $150,000 that has an estimated residual value of $1,000 and an estimated useful life of 10 years. The equipment is expected to produce 50,000 units of output over its useful life. The equipment produced 5,500 units in its first year. Determine depreciation expense for 2020, using units-of-production depreciation method. $___ 15. Computing Depreciation Using Multiple Depreciation Methods On January 1, 2020, Walker Inc. acquired equipment for $40,000. The expected useful life is 10 years and the residual value is $800. Total service hours for the equipment are estimated to be 10,000 while actual hours for 2020 were 900. Compute depreciation expense in 2020, under the following methods. Note: Round your answers to the nearest whole dollar. a. Straight-line___ b. Sum-of-the-years’-digits___ c. Double-declining-balance___ d. Units-of-productionAnswer ___ 16. Computing Partial Period, Straight-Line Depreciation Garcia Company purchased a building for $625,000 on March 1, 2020, with an estimated residual value of $50,000. Assuming a useful life of 40 years and that the company uses the straight-line depreciation method, compute depreciation expense for 2020. Note: Round your answer to the nearest whole dollar. Depreciation expense in 2020: $___ 17. Computing Composite Depreciation Taser Company owns the following assets acquired on January 1, 2020. AssetCostResidual ValueEstimated Useful Life A$60,000$1,00010 years B15,000-5 years C70,0002,0008 years a. Compute the composite annual depreciation rate. Round to two decimals. b. Compute the composite group useful life. Round to two decimals. c. Compute composite depreciation expense for 2020. 18. Computing Depreciation with an Estimate Change Whitney Company purchases equipment on July 1, 2020, for $34,000. This equipment has a useful life of five years and a residual value of $4,000. The company uses the straight-line depreciation method. On January 1, 2022, the company extended the estimate of the total useful life to six years and adjusted the salvage value to $2,000. Compute depreciation expense for 2022. Note: Round your answer to the nearest whole dollar. Depreciation expense for 2022: $__ 19. Computing Depreciation with a Change in Depreciation Method Whitney Company purchased equipment on January 1, 2020, for $90,000. This equipment has a useful life of 6 years and a residual value of $5,000. The company uses the double-declining depreciation method. On January 1, 2023, the company changes its depreciation method to the straight-line method. Compute depreciation expense for 2023. Note: Do not round until your final answer. Round your final answer to the nearest whole dollar. Depreciation expense for 2023: $____ 20. Recording Depreciation Error Correction Ordinary repairs of $10,000 in January of 2018
Jun 03, 2021
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