26th

section B its an explanation

Discussion Questions only

Chapter 10 Fixed Assets and Intangible Assets 487 b. 21,600 12,960 32,400 19,440 117,600 7,440** ..$60,000-S 1 50,000 x 40% *The asset is not depreciated below the estimated residual value of $12,000 7440-$150,000-$130,560-$12,000 2. Accumulated Depreciation-Equipment Loss on Sale of Equipment 9,440 Discussion Questions 1. O'Neil Office Supplies has a fleet of automobiles and trucks for use by salespersons and for deliv- ery of office supplies and equipment. Collins Auto Sales Co. has automobiles and trucks for sale. Under that will last 12 years. At the completion of the project, the machine will be sold. Over how n years should the machine be depreciated? Is it necessary for a business to use the same method of computing depreciation (a) for all classes of its depreciable assets and (b) for financial statement purposes and in determining income taxes? 7. what caption would the automobiles and trucks be reported in the balance sheet of (a) O'Neil Office Supplies and (b) Collins Auto Sales Co.? 2. Bullwinkle Co. acquired an adjacent vacant lot with t conditions is the use of an acceler- ated depreciation method most appropriate? is not intended to be used in Bullwinkle business operations. Where should such real estate be listed in the balance sheet? b. Why is an accelerated depreciation method of ten used for income tax purposes? What is the Modified Accelerated Cost Recovery System (MACRS), and under what conditions is it used? c. 3. Alpine Company solicited bids from several contrac- tors to construct an addition to its office building The lowest bid received was for $1,200,000. Alpine Company decided to construct the addition itself 9. For some of the fixed assets of a business, the bal- at a cost of $1,100,000. What amount should be recorded in the building account? ance in Accumulated Depreciation is exactly equal to the cost of the asset. (a) Is it permissible to record additional depreciation on the assets if they are still useful to the business? Explain. (b) When should an entry be made to remove the cost and the accumulated depreciation from the accounts? 4. Distinguish between the accounting for capital ex penditures and revenue expenditures 5. Immediately after a used truck is acquired, a new thisa 10. a. Over what period of time should the cost of a motor is installed at a total cost of $3,850. Is capital expenditure or a revenue expenditure? patent acquired by purchase be amortized? b. In general, what is the required accounting 6. Keyser Company purchased a machine that has a treatment for research and development manufacturer's suggested life of 20 years. The com- pany plans to use the machine on a special project c. How should goodwill be amortized