Question
The transactions below involve expenditures related to capital assets. (15) Problem 1 In the box provided, list the account that would be debited in each
The transactions below involve expenditures related to capital assets. (15)
Problem 1
In the box provided, list the account that would be debited in each cash. Be sure to state either a specific asset or a specific expense that would be debited.
1. Operator controls on equipment were replaced for $7,000 because the control devices that came with it were not adequate.
2. The amount of $4,600 was spent for decorative landscaping (planting flowers and shrubs).
3. A new air-conditioning system for the factory offices was bought for $36,000.
4. Paid $5,000 for plans from an architect for a new building.
5. Installation cost of fences around a property.
6. Accrued property taxes on land and building paid at time of purchase of real estate.
7. Property taxes on land and building for current year.
8. An amount of $1,500 was paid for adjusting and testing new machinery prior to its use.
9. Interior and exterior painting of a building.
10. Machinery damaged by a fork-lift truck was repaired for $5,000.
11. Cost of an oil change for the company truck.
13. Cost to pave the company parking lot.
14. Cost of four new tires for the company delivery van.
15. Cost of installing a new roof on the company's building.
Problem 2 Record the journal entries for the following transactions. (27)
1. Land and a Building were purchased for $145,000 cash. The fair market value of land was $100,000. The fair market value of building was $50,000. (6)
2. Land was acquired for $90,000 cash. The business planned to construct a small office building on the land. An old warehouse on the property was torn down at a cost of $6,000. The residual materials were sold for $1,700. Additional costs before construction began included a $1,100 legal fee for work concerning the land purchase, a $7,800 architect's fee, and $14,000 to put in driveways and a parking lot. The new building cost $750,000 to build. Record the journal entry for the purchase of the land, building and land improvement. All items were paid using cash. (10)
3. A piece of equipment was purchased for $55,000 cash. The business had to pay $500 for insurance while is was in transit and $1,000 for transportation charges. Once the equipment was at the business they paid $3,000 to assemble, install and test the equipment before use. The company also purchased an insurance policy to protect from fire, theft or damage of $1,500. Record the journal entry for the purchase of this equipment. (6)
4. The business decides to trade a piece of equipment they own for delivery truck from another business. The equipment they have cost them $25,500 when they purchased it and has a fair market value of $15,750. Record the acquisition of the delivery truck with the trade of the equipment. (5)
Particulars Debit Credit
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