Fixed Assets Exercise

1. A company purchased a truck on October 1 of the current year at a cost of $40,000. The truck is expected to last six years and have a salvage value of $2,200. The company's annual accounting period ends on December 31. 1. What is the depreciation expense for the current year, assuming the straight-line method is used? 2. What is the depreciation expense for the current year, assuming the doubledeclining-balance method is used?

2. On July 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 15,000 units were produced. Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses: a. The straight-line method of depreciation. b. The units-of-production method of depreciation. c. The double-declining balance method of depreciation. 3. (A) Thomas Enterprises purchased a depreciable asset on October 1, 2007 at a cost of $100,000.The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the assets book value on December 31, 2009 will be: A) $27,540 B) $21,600 C) $32,400 D) $18,360 E) $90,000

(B) Based on the information provided in question #A, Thomas Enterprises should recognize what amount of depreciation expense in 2011? A) $4,440 B) $6,610 C) $1,524 D) $5,520 E) $2,000 4. A company purchased property for a building site. The costs associated with the property were: Purchase price.................................................... Real estate commissions .................................... Legal fees .......................................................... Expenses of clearing the land ............................ Expenses to remove old building ...................... $175,000 15,000 800 2,000 1,000

What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building? A) $175,800 to Land; $18,800 to Building. B) $190,000 to Land; $3,800 to Building. C) $190,800 to Land; $1,000 to Building. D) $192,800 to Land; $0 to Building. E) $193,800 to Land; $0 to Building.

5. A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $45,000, and the parking lot at $18,000. The value of the land to be recorded in the accounting records is: A) $ 0. B) $ 36,000. C) $ 42,000. D) $ 45,000. E) $100,000. 6. A company purchased a special purpose machine on August 1 of the past year, and it was installed and ready to run on January 1 of this year. The following costs were incurred in the purchase and installation of the machine. Invoice price ................................................................................ Freight costs ................................................................................ Installation costs .......................................................................... Electrical and power connections ................................................ Repairs to correct damage incurred during uncrating ................. Costs to adjust machine to appropriate specifications ................. Spare parts for future use............................................................. Sales tax....................................................................................... Fines incurred during transport of machine................................. Cost of special foundation required for machine installation ...... $1,200,000 6,000 64,000 32,000 12,000 56,000 108,000 70,500 400 28,500

Determine the total cost of the machine.