On January 1, 2014, Jose Company purchased a building for $208,000 and a delivery truck for $21,600. The following expenditures have been incurred during 2016:

• The building was painted at a cost of $5,300.
• To prevent leaking, new windows were installed in the building at a cost of $11,000.
• To improve production, a new conveyor system was installed at a cost of $37,800.
• The delivery truck was repainted with a new company logo at a cost of $900.
• To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $4,900.
• The truck's engine was overhauled at a cost of $4,000.

Required:

1. Determine which of those costs should be capitalized. Assume that all costs were incurred on January 1, 2016. Select "Yes" if the cost should be capitalized; otherwise select "No".

The building was painted at a cost of $5,300.	No
To prevent leaking, new windows were installed in the building at a cost of $11,000.	No
To improve production, a new conveyor system was installed in the building at a cost of $37,800.	Yes
The delivery truck was repainted with a new company logo at a cost of $900.	No
To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $4,900.	Yes
The truck's engine was overhauled at a cost of $4,000.	No

Feedback

Capital expenditures are costs that improve an asset and are added to the asset account. Debit the asset account and credit Cash for amount paid. Revenue expenditures are costs that keep an asset in its normal operating condition and are treated as an expense.

Prepare the journal entry to capitalize the conveyor system. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Jan. 1

Cash

fill in the blank 133c54ff505fffe_2

Accounts payable

fill in the blank 133c54ff505fffe_10

Feedback

Incorrect

Prepare the journal entry to capitalize the hydraulic lift. How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Jan. 1

fill in the blank d7cd2a017fccf95_2

fill in the blank d7cd2a017fccf95_10

Feedback

Capital expenditures are costs that improve an asset and are added to the asset account. Debit the asset account and credit Cash for amount paid. Revenue expenditures are costs that keep an asset in its normal operating condition and treated as an expense.

2. Determine the amount of depreciation for the year 2016. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets. Round your intermediate calculations and answers to the nearest whole dollar.

Asset	2016 Depreciation
Building	$fill in the blank aee3f7fe9071007_1
Truck	$fill in the blank aee3f7fe9071007_2

Feedback

Calculate depreciation for the appropriate assets. Set up T account for accumulated depreciation. Determine book value at end of 2016. Record depreciation by increasing the expense account.

Prepare the journal entry to record depreciation: How does this entry affect the accounting equation? Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Dec. 31

fill in the blank 3e3431047fe7fd6_2

fill in the blank 3e3431047fe7fd6_10

fill in the blank 3e3431047fe7fd6_18

Feedback

Calculate depreciation the appropriate assets. Set up T account for accumulated depreciation. Determine book value at end of 2016. Record depreciation by increasing the expense account.

3. Prepare a partial Balance Sheet to show how would the assets appear December 31, 2016.

Jose Company
Balance Sheet (Partial)
December 31, 2016
	\
Total property, plant, and equipment