On January 1, 2010, Jose Company purchased a building for $200,000 and a delivery truck for $20,000.
Question:
On January 1, 2010, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2012:
• The building was painted at a cost of $5,000.
• To prevent leaking, new windows were installed in the building at a cost of $10,000.
• To improve production, a new conveyor system was installed at a cost of $40,000.
• The delivery truck was repainted with a new company logo at a cost of $1,000.
• To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000.
• The truck's engine was overhauled at a cost of $4,000.
Required
1. Determine which of those costs should be capitalized. Also, identify and analyze the effect of the capitalized costs. Assume that all costs were incurred on January 1, 2012.
2. Determine the amount of depreciation for the year 2012. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets.
3. How would the assets appear on the balance sheet of December 31, 2012?
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
1 The effect of the capitalized cost for the new conveyor system can be identified and analyzed as f...View the full answer
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1111534912
8th edition
Authors: Gary A. Porter, Curtis L. Norton
