Question 1: For each of the following situations, indicate whether it is a capital or revenue expenditure. 1. Purchased land and a building at a cost of $750,000 by paying $200,000 down and signing a two-year note payable for the remainder. 2. Spent $325 on a tune-up for a truck used in making deliveries. 3. The owner of a restaurant paid a plumber $400 to install a new dishwasher in the kitchen. 4. Paid $1,300 in sales tax on a new delivery van when registering the van at the Registry of Motor Vehicles. 5. A new machine was accidently damaged during installation. The uninsured cost to repair the machine was $1,250.

Question 2: Winters Company purchased a new van to expand its business. The invoice price of the van was $35,400, with additional costs of $950 for dealer prep and $675 in destination charges. Winters also had the dealer install special roof racks at a cost of $1,450 and paid $2,255 in sales tax, $175 in annual registration fees, and $60 for the title. The annual insurance bill totaled $1,960, and Winters opted for an extended warranty package costing $935. Within one months time, Winters spent $330 for gasoline. Determine the dollar amount that Winters should debit to Vehicles account.

Question 3: Dray Enterprises recently acquired a new machine at a cost of $59,000. The machine has an estimated useful life of six years or 45,000 production hours and salvage value is estimated at $5,000. During the first two years of the assets life, 8,000 and 7,500 production hours, respectively, were logged by the machine. Calculate the depreciation charge for the first two years of the assets life using the (a) straight-line method, (b) units-of-production method and (c) double-declining-balance method.

Question 4: Shenefelt Medical Center wants to dispose of its CAT scan machine. The original cost of the machine was $445,000, and depreciation of $374,000 has been recorded to date. The purchasing manager is contemplating the following alternatives to dispose of the machine. (Treat each alternative independently.)

1. Mainland Medical Supply is willing to take the old machine and give Shenefelt a $85,000 trade-in allowance toward the purchase of a new CAT scan machine with a list price of $310,000. The balance of the price must be paid in cash.

2. Cornell Medical Supply is willing to give Shenefelt a $65,000 trade-in allowance on a new CAT scan machine with a list price of $325,000, the balance to be paid in cash.

3. Century Medical Center is willing to make an even exchange. Century will exchange its CAT scan machine for Shenefelt's CAT scan . Shenefelt's CAT scan has a fair market value of $80,000. The CPA for Shenefelt says this exchange has no commercial substance.

4. Saxony Medical Center is willing to give Shenefelt an ambulance with a fair market value of $65,000 and $20,000 cash for Shenefelt's CAT scan. Prepare Shenefelt's journal entry to record each of these alternatives for financial statement purposes.