Brief Exercises BE9-1 The following costs were incurred by Shumway Company in purchasing land: cash price, Determine cost of land $85,000; legal fees, $1,500; removal of old building, $5,000; clearing and grading, $3,500; instal- and land improvements. lation of a parking lot, $5,000. (a) What is the cost of the land? (b) What is the cost of the land (SO 1) AP improvements? BE9-2 Vroom Company incurs the following costs in purchasing equipment: invoice price, $40,375; Determine cost of transportation-in, $625; installation and testing, $1,000; one-year insurance policy, $1,750. What is the equipment. (SO 1) AP cost of the equipment? BE9-3 In the space provided, indicate whether each of the following items is an operating expenditure Identify operating and (O) or a capital expenditure (C): Repaired building roof. $1,500 capital expenditures. (SOI) K 32999gesge (a) (b) Replaced building roof, $27,500 (c) Purchased building, $480,000 (d) Paid insurance on equipment in transit, $550 (e) Purchased supplies, $350 (f) Purchased truck, $55,000 Purchased oil and gas for truck, $125 (h) Rebuilt engine on truck. $5,000 (i) Replaced tires on truck, $600 (S) Estimated retirement cost of plant, $1,000,000 (k) Added new wing to building. $250,000 Painted interior of building. $1,500 (m) Replaced an elevator, $17,500 BE9-4 Rainbow Company purchased land, a building, and equipment on January 2, 2014, for $850,000. Record basket purchase. The company paid $170,000 cash and signed a mortgage note payable for the remainder. Management's (SO 1) AP best estimate of the value of the land was $352,000; of the building, $396,000, and of the equipment. $132,000. Record the purchase. BE9-5 Butters Company acquires equipment at a cost of $42,000 on January 3, 2014. Management esti mates the equipment will have a residual value of $6,000 at the end of its four-year useful life. Assume the company uses the straight-line method of depreciation. Calculate the depreciation expense (a) for each year of the equipment's life, and (b) in total over the equipment's life. Butters has a December 31 fiscal year end. Calculate straight-line depreciation. (SO 2) AP