1) Brady Self Storage purchased land, paying $160,000 cash as a down payment and
ID: 2576263 • Letter: 1
Question
1)
Brady Self Storage purchased land, paying $160,000 cash as a down payment and signing a $195,000
note payable for the balance. Brady also had to pay delinquent property tax of $3,000, title insurance costing $6,000, and $4,000 to level the land and remove an unwanted building.
The company paid $56,000 to add soil for the foundation and then constructed an office building at a cost of $950,000. It also paid $47,000 for a fence around the property, $11,000 for the company sign near the property entrance, and $10,000 for lighting of the grounds.
Requirement
1. What is the capitalized cost of each of
Brady's land, land improvements, and building?
The cost of the land is
$ .
2) West Side's Pizza bought a used Toyota delivery van on January 2, 2014, for $22,000. The van was expected to remain in service for four years left parenthesis (80,000 miles). At the end of its useful life,
West Side's officials estimated that the van's residual value would be $2,000.
The van traveled 32,000 miles the first year, 28,000 miles the second year, 15,000 miles the third year, and 5,000 miles in the fourth year.
Requirements
1.
Prepare a schedule of depreciation expense per year for the van under the three depreciation methods.
2.
Which method best tracks the wear and tear on the van?
3.
Which method would West Side's prefer to use for income tax purposes? Explain in detail why
West Side's prefers this method.
Requirement 1. Prepare a schedule of depreciation expense per year for the van under the three depreciation methods.
(For units-of-production and double-declining-balance, round to the nearest two decimal places after each step of the calculation. For years with $0 depreciation, make sure to enter "0" in the appropriate column.)
Year
Straight-Line
2014
2015
2016
2017
Total
3)
Desmond Corp. purchased 55, $1,000, 55% bonds of Geotherm Corporation when the market rate of interest was 14%. Interest is paid semiannually on the bonds, and the bonds will mature in four years. Using the PV function in Excel @, compute the price Desmond paid (the present value) on the bond investment.
(Assume that all payments of interest and principal occur at the end of the period. Round your answer to the nearest cent.)
Desmond paid $ on the bond investment.
1.
Prepare a schedule of depreciation expense per year for the van under the three depreciation methods.
2.
Which method best tracks the wear and tear on the van?
3.
Which method would West Side's prefer to use for income tax purposes? Explain in detail why
West Side's prefers this method.
Explanation / Answer
Solution:
Calculation of Cost of the Land:
Calculation of Cost of the Land Improvements:
Calculation of Cost of the Building:
Particulars Amount Cash 160,000 Note Payable 195,000 Property Tax 3,000 Insurance 6,000 Level the Land 4,000 Cost of the Land 368,000Related Questions
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