Problem One:

On March 1, 2019, Mark Company acquired real estate on which it planned to construct a small office building. The company paid $75,000 in cash. An old warehouse on the property was razed at a cost of $6,400; the salvaged materials were sold for $1,200. Additional expenditures before construction began included $800 attorneys fee for work concerning the land purchase, $3,800 real estate brokers fee, $5,800 architects fee, and $11,000 to put in driveways and a parking lot.

Instructions

1. Determine the amount to be reported as the cost of the land.

2. For each cost not used in part (a), indicate the account to be debited.

Problem Two:

Younger Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2018, at a cost of $188,000. Over its 4-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $8,000.

Instructions

1. Compute the depreciation cost per unit.

2. Calculate the depreciation expense, accumulated depreciation, and book value for 2018, 2019, 2020, and 2021 assuming actual mileage was: 2018, 27,000; 2019, 34,000; 2020, 24,000; and 2021, 18,000.

Year Depreciation Expense Accumulated Depreciation Book Value

2018

2019

2020

2021

Problem Three:

Kinder Company purchased a new machine on October 1, 2018, at a cost of $145,000. The company estimated that the machine will have a salvage value of $25,000.The machine is expected to be used for 20,000 working hours during its 5-year life.

Instructions

Compute the depreciation expense under the following methods for the year indicated.

1. Straight-line for 2018 and 2019.

2. Units-of-activity for 2018 and 2019, assuming machine usage was 3,400 hours for 2018 and 12,200 for 2019.

3. Declining-balance using double the straight-line rate for 2018 and 2019.

4. Assuming the straight-line method.
   1. Prepare the journal entry to record 2018 depreciation.

Date	Account	DR	CR

2. Show how the truck would be reported in the December 31, 2018, balance sheet.

Problem Four:

On January 1, 2019, Jaime Inc. invested $900,000 in a mine estimated to have 1,200,000 tons of ore of uniform grade. During the 2019, 100,000 tons of ore were mined and sold.

Instructions

1. Prepare the journal entry to record depletion expense.

Date	Account	DR	CR

2. Assume that the 100,000 tons of ore were mined, but only 80,000 units were sold. How are the costs applicable to the 20,000 unsold units reported?

Problem Five:

The following are selected 2019 transactions of Penaflok Corporation.

Jan. 1 Purchased a small company and recorded goodwill of $200,000. Its useful life is indefinite.

May 1 Purchased for $120,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.

Instructions

Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

Date	Account	DR	CR