14. Indicate whether each of the following expenditures should beclassified as l
ID: 2444294 • Letter: 1
Question
14.
Indicate whether each of the following expenditures should beclassified as land (L), land improvements (LI), buildings (B),equipment (E), or none of these (X).
_____ 1. Computer installationcost
_____ 2. Driveway cost
_____ 3. Architect's fee
_____ 4. Surveying costs
_____ 5. Grading costs
_____ 6. Cost of lighting forparking lot
_____ 7. Insurance while in transitand freight on computer purchased
_____ 8. Material and labor costsincurred to construct factory
_____ 9. Cost of tearing down awarehouse on land just purchased
_____ 10. Utility cost during firstyear
15.
Trouble Company purchased equipment on January 1, 2005, for$65,000. It is estimated that the equipment will have a $5,000salvage value at the end of its 5-year useful life. It is alsoestimated that the equipment will produce 100,000 units over its5-year life.
Instructions
Answer the following independent questions.
1.
Compute the amount of depreciation expense for the year endedDecember 31, 2005, using the straight-line method ofdepreciation.
2.
If 16,000 units of product are produced in 2005 and 24,000 unitsare produced in 2006, what is the book value of the equipment atDecember 31, 2006? The company uses the units-of-activitydepreciation method.
3.
If the company uses the double-declining-balance method ofdepreciation, what is the balance of the AccumulatedDepreciation—Equipment account at December 31, 2007?
16.
The credit portion of the journal entry to record depreciationexpense for a truck would be to what account-- ______________account.
17.
The interest charged on a $100,000 note payable, at the rate of9%, on a 90-day note would be
A)
$9,000.
B)
$5,000.
C)
$2,250.
D)
$ 750.
14.
Indicate whether each of the following expenditures should beclassified as land (L), land improvements (LI), buildings (B),equipment (E), or none of these (X).
_____ 1. Computer installationcost
_____ 2. Driveway cost
_____ 3. Architect's fee
_____ 4. Surveying costs
_____ 5. Grading costs
_____ 6. Cost of lighting forparking lot
_____ 7. Insurance while in transitand freight on computer purchased
_____ 8. Material and labor costsincurred to construct factory
_____ 9. Cost of tearing down awarehouse on land just purchased
_____ 10. Utility cost during firstyear
Explanation / Answer
14) 1. E 2.LI 3.B 4.L 5.L 6.LI 7.X 8.B 9.L 10.X 15. 1. Depreciation expense using straight-line method 65,000-5,000 = $ 12,000 5 2. Book value on Dec 31,2006 is $ 41,000. 65,000-5,000 = 0.60 / unit produced 100,000 yr .2005 16,000 units produced 16,000 *0.60 = 9,600 yr 2006 24,000 units produced 16,000 * .60 =14,400 Book value = 65,000 -9,600-14,400 = $41,000 3. Balance of the accumulate depreciation at Dec 31,07 is $50,960 Double declining percentage is 40% ( 100/5 * 2) 65,000 * 40% 26,000 39,000 * 40% 15,600 23,400*40% 9,360 50,960 16. Accumulated depreciation account. 17. C $ 2,250 100,000 * 9/100 * 90/360
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