Connect - another Financial Accounting, Chapter 8

1.

Cala Manufacturing purchases a large lot on which an old building is located as part of its plans to build a new plant. The negotiated purchase price is $215,000 for the lot plus $110,000 for the old building. The company pays $34,000 to tear down the old building and $50,261 to fill and level the lot. It also pays a total of $1,465,515 in construction costs—this amount consists of $1,378,500 for the new building and $87,015 for lighting and paving a parking area next to the building.
  
Prepare a single journal entry to record these costs incurred by Cala, all of which are paid in cash.

No	Transaction	General Journal	Debit	Credit
1	1	Land sum of yellowselected answer correct	409,261selected answer correct	not attempted
		Land improvementsselected answer correct	87,015selected answer correct	not attempted
		Buildingselected answer correct	1,378,500selected answer correct	not attempted
		Cashselected answer correct	not attempted	1,874,776selected answer correct

----------------------------------------------------------------------------------- 2. On January 2, 2017, the Matthews Band acquires sound equipment for concert performances at a cost of $69,200. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During year 2017, the band performs 45 concerts.    Compute the year 2017 depreciation using the straight-line method. ----------------------------------------------------------------------------------- 3. On January 2, 2017, the Matthews Band acquires sound equipment for concert performances at a cost of $66,800. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During year 2017, the band performs 45 concerts.   Compute the year 2017 depreciation using the units-of-production method. ----------------------------------------------------------------------------------- 4. A fleet of refrigerated delivery trucks is acquired on January 5, 2017, at a cost of $900,000 with an estimated useful life of 10 years and an estimated salvage value of $81,000.    Compute the depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.) ----------------------------------------------------------------------------------- 5. Use the following information for the Exercises below. [The following information applies to the questions displayed below.] On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $288,000. The machine is expected to last five years and have a salvage value of $44,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the straight-line method. Choose Numerator: / Choose Denominator: = Annual Depreciation Cost minus salvageselected answer correct / Estimated useful life (years)selected answer correct = Annual depreciation $244,000selected answer correct / 5selected answer correct = $48,800 Year Annual Depreciation x Fraction of Year = Depreciation Expense 2016 $48,800 x 9/12selected answer correct $36,600selected answer correct 2017 $48,800 x 12/12selected answer correct $48,800selected answer correct ----------------------------------------------------------------------------------- 6. Use the following information for the Exercises below. [The following information applies to the questions displayed below.]  On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $288,000. The machine is expected to last five years and have a salvage value of $44,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the double-declining-balance method. (Enter all amounts positive values.) Depreciation for the Period End of Period Annual Period Beginning of Period Book Value Depreciation Rate Partial Year Depreciation Expense Accumulated Depreciation Book Value 2016 $288,000selected answer correct 40%selected answer correct 9/12selected answer correct $86,400selected answer correct $86,400 $201,600 2017 $201,600selected answer correct 40%selected answer correct 12/12selected answer correct $80,640selected answer correct $167,040 $120,960 ----------------------------------------------------------------------------------- 7. Garcia Co. owns equipment that cost $84,800, with accumulated depreciation of $44,800. Garcia sells the equipment for cash.    Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $53,000 cash, (2) $40,000 cash, and (3) $34,900 cash. No Transaction General Journal Debit Credit 1 1 Cashselected answer correct 53,000selected answer correct not attempted Accumulated depreciationselected answer correct 44,800selected answer correct not attempted Gain on sale of equipmentselected answer correct not attempted 13,000selected answer correct Equipmentselected answer correct not attempted 84,800selected answer correct 2 2 Cashselected answer correct 40,000selected answer correct not attempted Accumulated depreciationselected answer correct 44,800selected answer correct not attempted Equipmentselected answer correct not attempted 84,800selected answer correct 3 3 Cashselected answer correct 34,900selected answer correct not attempted Accumulated depreciationselected answer correct 44,800selected answer correct not attempted Loss on sale of equipmentselected answer correct 5,100selected answer correct not attempted Equipmentselected answer correct not attempted 84,800selected answer correct ----------------------------------------------------------------------------------- 8. Diaz Company owns a milling machine that cost $126,300 and has accumulated depreciation of $93,500. Prepare the entry to record the disposal of the milling machine on January 3 under each of the following independent situations. The machine needed extensive repairs, and it was not worth repairing. Diaz disposed of the machine, receiving nothing in return. Diaz sold the machine for $15,500 cash. Diaz sold the machine for $32,800 cash. Diaz sold the machine for $41,700 cash. No Date General Journal Debit Credit 1 Jan 03 Accumulated depreciation—Milling machineselected answer correct 93,500selected answer correct not attempted Loss on disposal of milling machineselected answer correct 32,800selected answer correct not attempted Milling machineselected answer correct not attempted 126,300selected answer correct 2 Jan 03 Cashselected answer correct 15,500selected answer correct not attempted Accumulated depreciation—Milling machineselected answer correct 93,500selected answer correct not attempted Loss on sale of milling machineselected answer correct 17,300selected answer correct not attempted Milling machineselected answer correct not attempted 126,300selected answer correct 3 Jan 03 Cashselected answer correct 32,800selected answer correct not attempted Accumulated depreciation—Milling machineselected answer correct 93,500selected answer correct not attempted Milling machineselected answer correct not attempted 126,300selected answer correct 4 Jan 03 Cashselected answer correct 41,700selected answer correct not attempted Accumulated depreciation—Milling machineselected answer correct 93,500selected answer correct not attempted Gain on sale of milling machineselected answer correct not attempted 8,900selected answer correct Milling machineselected answer correct not attempted 126,300selected answer correct ----------------------------------------------------------------------------------- 9. On January 2, 2017, the Matthews Band acquires sound equipment for concert performances at a cost of $67,400. The band estimates it will use this equipment for five years. It estimates that after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged.   Compute the revised depreciation for both the second and third years.