Basket purchase allocation Minott Jewelers, Ltd., purchased store fixtures, display cases, and a maximum-security commercial safe for a lump-sum price of $18,000 from a bankrupt competitor. Appraised values were as follows: store fixtures, $9,000; display cases, $13,500; commercial safe, $7,500.

Required: What cost should be recorded for the commercial safe?

Mini-Exercise 6.2 LO 2

Capitalizing versus expensing Riley Holdings Corp. incurred the following expenditures: $4,200 cost to replace the transmission in a company-owned vehicle; $12,400 cost of annual property insurance on the companys production facilities; $9,700 cost to develop and register a design patent; $24,600 cost to add a security and monitoring system to the companys distribution center; $500 cost to repair paint damage on a company-owned vehicle caused by normal wear and tear.

Mini-Exercise 6.3 LO 3

Depreciation calculation methods Gandolfi Construction Co. purchased a used CAT 336DL earth mover at a cost of $500,000 in January 2016. The companys estimated useful life of this heavy equipment is 10 years, and the estimated salvage value is $100,000.

Required:

a. Using straight-line depreciation, calculate the depreciation expense to be recognized for 2016, the first year of the equipments life, and calculate the equipments net book value at December 31, 2018, after the third year of the equipments life. b. Using declining-balance depreciation at twice the straight-line rate, calculate the depreciation expense to be recognized for 2018, the third year of the equipments life.