What are the right answers and why?? NM 5, 000 to have it shioped to the factory

Question

What are the right answers and why??
NM 5, 000 to have it shioped to the factory. They paid $22,500 in sales tax and $4,5 hecoa roperty taxes. An additional $45,000 was spent on installation and testg 500 spent $28,000 on repairs and $6,000 on insurance the first year it was What amount should Donaldson Corp capitalize for this equipment? equipment costing $630,000 and paid an additions 1. Donaldson Corp $35 in annual A. $771,000 $737,000 $732,500 D. $630,000 A machine has a cost of $65,000, an estimated residual value of $15 d on a straight-line for accumulated estimated useful life of ten years. The machine is being depreciate d of the second year, what amount will be reported oc depreciation? A. $13,000 B$10,000 C. $6,500 D. $5,000 3. Stevenson, Inc. purchased a machine for $230,000 on September 1, 2017. The estimated service life is eight years with a $20,000 residual value. Stevenson records artial-year depreciation based o pense for the year ended December 31, 2017, using straight-line depreciation, is: n the number of months in service. Depreciation $6,563 $8,750 $9,583 $26,250

Explanation / Answer

1 Ans must be C. $732500. It includes Cost of machinery + Shipping cost + Sales cost + Installation and testing cost = 630000+35000+22500+45000 = $ 732500.   Repair & Insurance cost are to be capitalised as it is revenue in nature. Also Property tax should not be capitalised as it is not related to machinery but I not confident about it, that in what sense it is provided.

2 Ans is B. $10000. Dep is calculated as (65000-15000)/10 = 5000 SLM. At the end of 2 year, accumulated depreciation would be 5000+5000= $10000.

3 Ans is B. $8750.   Dep is calculated as (230000-20000)/8 = 26250. For the year ended Dec 31, 2017 it is calculated as 26250X4/12= 8750.

4 Ans must be D. $712700. It is calculated as Cost of land - Sale of scrap + Demolition of old building + Labellling cost + Title Insurance + Back Property Tax. = 650000-10000+35000+17500+3500+16700 = $712700.   Current Year Property tax should not be included as it of recurring nature.

5 Ans is A. $12000. It is calculated as Cost of Machine - Accumulated Depreciation = 78000-42000 = $36000 it is W.D.V of the machine. which is sold as $ 24000. Then the loss is 36000-24000= $12000.

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