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 $15,000. He added a tool chest and side racks for ladders for $5,000. The truck is expected to last four years and then be sold for $1,200. Pete uses straight-line depreciation.

On January 1, he purchased several items at an auction for $2,795. These items had fair market values as follows:

10 cases of paint trays and roller covers	$200
Storage cabinets	900
Ladders and scaffolding	3,200

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.

On February 1, Pete paid the city $1,800 for a three-year license to operate the business.

On September 1, Pete sold an old truck for $5,860 that had cost $15,100 when it was purchased on September 1, 2012. It was expected to last eight years and have a salvage value of $700. Pete used the straight line method of depreciation.

Required:

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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	$fill in the blank 803366fa9fe6fbd_1
b. Part 1 - recorded amount of supplies	$fill in the blank 803366fa9fe6fbd_2
b. Part 2 - recorded cost of office furniture	$fill in the blank 803366fa9fe6fbd_3
b. Part 3 - recorded cost of equipment	$fill in the blank 803366fa9fe6fbd_4
c. Recorded cost of prepaid license	$fill in the blank 803366fa9fe6fbd_5
d. Book value of truck at time of sale	$fill in the blank 803366fa9fe6fbd_6

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	$fill in the blank 803366fa9fe6fbd_7
b. Part 1 - supplies expense	$fill in the blank 803366fa9fe6fbd_8
b. Part 2 - office furniture depreciation	$fill in the blank 803366fa9fe6fbd_9
b. Part 3 - equipment depreciation	$fill in the blank 803366fa9fe6fbd_10
c. License amortization	$fill in the blank 803366fa9fe6fbd_11
d. Part 1 - old truck depreciation	$fill in the blank 803366fa9fe6fbd_12
d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss)	$fill in the blank 803366fa9fe6fbd_13

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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.

Compute the amount of the prepaid license expense that is used in the current year. Compute book value of the truck at the time of sale.

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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:
Accumulated depreciationCashEquipmentLicense expensePrepaid licenseAccumulated depreciation		$Accumulated depreciation
Property, plant, and equipment:
License expensePrepaid licenseSupplies expenseTruckTruck depreciationSupplies expense	$Supplies expense
CashLicense expenseOffice furnitureOffice furniture expensePrepaid licenseOffice furniture expense	Office furniture expense
CashEquipmentEquipment expensePrepaid licenseSupplies expenseEquipment expense	Equipment expense
	$fill in the blank a75131016fadfab_9
Accumulated depreciationCashDepreciation expensePrepaid licenseSupplies expensePrepaid license	Prepaid license
Total property, plant, and equipment, net		$fill in the blank a75131016fadfab_12