Question
Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation The following events took place at Pete's Painting Company during 2017: On January 1, Pete
Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation
The following events took place at Pete's Painting Company during 2017:
- On January 1, Pete bought a used truck for $13,000. He added a tool chest and side racks for ladders for $4,200. The truck is expected to last four years and then be sold for $800. Pete uses straight-line depreciation.
- On January 1, he purchased several items at an auction for $4,550. These items had fair market values as follows:
Pete will use all of the paint trays and roller covers this year. The storage cabinets are expected to last nine years; the ladders and scaffolding, four years.10 cases of paint trays and roller covers $200 Storage cabinets 2,700 Ladders and scaffolding 3,600 - On February 1, Pete paid the city $1,836 for a three-year license to operate the business.
- On September 1, Pete sold an old truck for $5,210 that had cost $13,230 when it was purchased on September 1, 2012. It was expected to last eight years and have a salvage value of $750. Pete used the straight line method of depreciation.
Required:
1. For each situation, determine the value assigned to the asset when it is purchased. For (d), determine the book value when it is sold. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.
| Asset | Relevant Value |
| a. Recorded cost of truck | $ |
| b. Part 1 - recorded amount of supplies | $ |
| b. Part 2 - recorded cost of office furniture | $ |
| b. Part 3 - recorded cost of equipment | $ |
| c. Recorded cost of prepaid license | $ |
| d. Book value of truck at time of sale | $ |
2. Determine the amount of depreciation or other expense to be recorded for each asset for 2017. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.
| Asset | 2017 Expense Amount |
| a. Truck depreciation | $ |
| b. Part 1 - supplies expense | $ |
| b. Part 2 - office furniture depreciation | $ |
| b. Part 3 - equipment depreciation | $ |
| c. License amortization | $ |
| d. Part 1 - old truck depreciation | $ |
| d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss) | $ |
Feedback
Determine value at time of purchase. Use the fair market values of the supplies expense, office furniture and equipment at the time of purchase. Determine value of prepaid license expense.
Compute the amount of the prepaid license that is used in the current year. Compute book value of the truck at the time of sale.
3. How would these assets appear on the balance sheet as of December 31, 2017?
| Pete's Painting Company | ||
| Balance Sheet (Partial) | ||
| December 31, 2017 | ||
| Current assets: | ||
| $ | |
| Property, plant, and equipment: | ||
| $ | |
| ||
| ||
| $ | ||
| ||
| Total property, plant, and equipment, net | $ | |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Comparative international accounting
Authors: Christopher nobes, Robert parker
9th Edition
273703579, 978-0273703570
