Part A

KNO Enterprises purchased an asset on January 1, 2014, for $9,300. The asset was expected to have a ten-year life and a $1,000 salvage value. KNO Enterprises uses the straight-line method of depreciation. On January 1, 2016, KNO Enterprises made a major repair to the asset of $5,000, extending its life. The asset is expected to last ten years from January 1, 2016.

Calculate the amount of depreciation for 2016. $

Part B

Acquisition Cost

On January 1, 2016, Topaz Corp. purchased a piece of equipment with a list price of $60,000. The following amounts were related to the equipment purchase:

Terms of the purchase were 2/10, net 30. Topaz paid for the purchase on January 8.

Freight costs of $1,000 were incurred.

A state agency required that a pollution control device be installed on the equipment at a cost of $2,500.

During installation, the equipment was damaged and repair costs of $4,000 were incurred.

Architect's fees of $7,900 were paid to redesign the work space to accommodate the new equipment.

Topaz purchased liability insurance to cover possible damage to the asset. The three-year policy cost $8,000.

Topaz financed the purchase with a bank loan. Interest of $3,000 was paid on the loan during 2016.

Required:

Determine the acquisition cost of the equipment. $

Part C

Capitalization of Interest and Depreciation

During 2016, Gota Corp. borrowed $70,000 from a local bank. In addition, Gota used $120,000 of cash to construct a new corporate office building. Based on average accumulated expenditures, the amount of interest capitalized during 2016 was $8,000. Construction was completed, and the building was occupied on January 1, 2017.

Required:

1. Determine the acquisition cost of the new building. $

2. The building has an estimated useful life of 20 years and a $5,000 salvage value. Assuming that Gota uses the straight-line basis to depreciate its operating assets, determine the amount of depreciation expense for 2016 and 2017. If necessary, round any depreciation calculations to the nearest dollar. If an amount is zero, enter "0".

Year	Straight-Line Depreciation
2016	$
2017	$