Module 9_Chapter 8_Handout

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Module 9, Chapter 8 Handout Reporting and Analyzing Long-Lived Assets Page 1 of 5 Show You Problem 1 On March 1, 2022, Colorado Company acquired real estate, on which it planned to construct a small office building, by paying $85,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $2,200. Additional expenditures before construction began included $1,500 attorney's fee for work concerning the land purchase, $5,500 real estate broker's fee, $9,100 architect's fee, and $16,000 to put in driveways and a parking lot. Instructions a. Determine the amount to be reported as the cost of the land. b. For each cost not used in part (a), indicate the account to be increased. c. A manager at Colorado Company would like to know the account classifications for various types of costs that the company may incur in the future. Indicate whether each of the following expenditures should be classified as land, land improvements, buildings, equipment, or something else. Expenditure Account Computer installation cost Driveway cost Architect’s fee Surveying costs Grading costs Cost of lighting for parking lot Insurance while in transit and freight on computer purchased Material and labor costs incurred to construct factory Cost of tearing down a warehouse on land just purchased Utility cost during first year

Module 9, Chapter 8 Handout Reporting and Analyzing Long-Lived Assets Page 2 of 5 Show You Problem 2 Cam’s Repair Service uses the straight-line method of depreciation. The company's fiscal year end is December 31. The following transactions and events occurred during the first three years. 2021 July 1 Purchased equipment from the Equipment Center for $5,500 cash plus sales tax of $305, and shipping costs of $250. Nov. 3 Incurred ordinary repairs on computer of $240. Dec. 31 Recorded 2021 depreciation on the basis of a four-year life and estimated salvage value of $455. 2022 Dec. 31 Recorded 2022 depreciation. 2023 Jan. 1 Paid $1,800 for a major upgrade of the equipment. This expenditure is expected to increase the operating efficiency and capacity of the equipment. Instructions Identify the accounts to be increased/decreased and the amount of the increase/decrease.

Module 9, Chapter 8 Handout Reporting and Analyzing Long-Lived Assets Page 3 of 5 Show You Problem 3 Here are selected 2022 transactions of Ram Corporation. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2012. The machine cost $61,900 and had a useful life of 10 years with no salvage value. 30-Jun Sold a computer that was purchased on January 1, 2020. The computer cost $35,800 and had a useful life of 4 years with no salvage value. The computer was sold for $4,300 cash. Dec. 31 Sold a delivery truck for $9,450 cash. The truck cost $23,800 when it was purchased on January 1, 2019, and was depreciated based on a 5-year useful life with a $3,300 salvage value. Instructions Prepare a tabular summary to record all transactions described on the above dates. Depreciation was last recorded on December 31, 2021. Update depreciation on assets disposed of, where applicable. Ram Corporation uses straight-line depreciation.

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Module 9, Chapter 8 Handout Reporting and Analyzing Long-Lived Assets Page 4 of 5 Assets = Liabilities + Stockholders' Equity Common Retained Earnings Cash Equipment (Machine) A/D - Equipment = + Stock + Rev. - Exp. 12/31/21 61,900 (61,900) 1/1/21 Assets = Liabilities + Stockholders' Equity Common Retained Earnings Cash Equipment (Computer) A/D - Equipment = + Stock + Rev. - Exp. 12/31/21 35,800 (17,900) 6/30/22 Assets = Liabilities + Stockholders' Equity Common Retained Earnings Cash Equipment (Truck) A/D - Equipment = + Stock + Rev. - Exp. 12/31/21 23,800 (12,300) 12/31/22

Module 9, Chapter 8 Handout Reporting and Analyzing Long-Lived Assets Page 5 of 5 Coach You Problem 1 Orange Company incurs these expenditures in purchasing a truck: cash price $25,290, accident insurance (during use) $2,370, sales taxes $1,560, motor vehicle license $470, and painting and lettering $2,110. What is the cost of the truck? Coach You Problem 2 Aggie Company purchased a new machine on October 1, 2022, at a cost of $90,400. The company estimated that the machine has a salvage value of $7,840. The machine is expected to be used for 71,800 working hours during its 8-year life. Compute the depreciation expense under the straight-line method for 2022 and 2023, assuming a December 31 year-end. Coach You Problem 3 CSU Company has delivery equipment that cost $56,800 and has been depreciated $24,300. What is the gain or loss on disposal under each independent situation? a. It was scrapped as having no value. b. It was sold for $ $36,400. c. It was sold for $19,600.