MGMT FFACCh 9:Exercises

Item 1:Entity A purchased land adjacent to its plant to improve access for trucks making deliveries.Expenditures incurred in purchasing the land were as follows:

Purchase price$55,000

Broker's fees6,000

Title search and other fees5,000

Demolition of an old building on the property,5,700

Grading1,200

Digging foundation for the road3,000

Laying and paving driveway25,000

Lighting 7,500

Signs1,500.

List the items and amounts that should be included in the Land account.

Item 2:Equipment with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated life of 4 years.Compute the annual depreciation and then show what this asset looks like on the balance sheet at the end of the second year.

Item 3:Equipment that cost $72,000 and on which $60,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash. Make the entry to record this transaction.Hint:Compute BV and then gain (loss).

Item 4:Equipment costing $60,000 with a salvage value of $8,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, compute the revised annual depreciation expense and make the entry.