NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements and flight equipment modifications are capitalized when such costs are determined to extend the useful life of the asset or are part of the cost of acquiring the asset. Expenditures for equipment overhaul costs of engines or airframes prior to their operational use are capitalized as part of the cost of such assets as they are costs required to ready the asset for its intended use. Maintenance and repairs costs are charged to expense as incurred... Assume that Commonwealth Delivery made extensive repairs on an existing building and added a new wing. The building is a garage and repair facility for delivery trucks that serve the Denver area. The existing building originally cost $954,000, and by the end of last year, it was half depreciated based on use of the straight-line method, a 18-year estimated useful life and no residual value. During the current year, the following expenditures related to the building were made: a. Ordinary repairs and maintenance expenditures for the year, $14,000 cash. b. Extensive and major repairs to the roof of the building, $132,000 cash. These repairs were completed at the end of the current year. c. The new wing was completed on December 31 of the current year at a cash cost of $238,000. P8-2 Part 1 Required: 1. Applying the policies of Commonwealth Delivery, complete the following, indicating the effects for the preceding expenditures. Indicate the effects positive value for increase, negative value for decrease. Accumulated Depreciation Expense Repairs Expense Building Depreciation Cash Balance January 1 2$ 954,000 24 477,000 Depreciation Balance prior to expenditures 954,000 Expenditure a. Expenditure b.
NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements and flight equipment modifications are capitalized when such costs are determined to extend the useful life of the asset or are part of the cost of acquiring the asset. Expenditures for equipment overhaul costs of engines or airframes prior to their operational use are capitalized as part of the cost of such assets as they are costs required to ready the asset for its intended use. Maintenance and repairs costs are charged to expense as incurred... Assume that Commonwealth Delivery made extensive repairs on an existing building and added a new wing. The building is a garage and repair facility for delivery trucks that serve the Denver area. The existing building originally cost $954,000, and by the end of last year, it was half depreciated based on use of the straight-line method, a 18-year estimated useful life and no residual value. During the current year, the following expenditures related to the building were made: a. Ordinary repairs and maintenance expenditures for the year, $14,000 cash. b. Extensive and major repairs to the roof of the building, $132,000 cash. These repairs were completed at the end of the current year. c. The new wing was completed on December 31 of the current year at a cash cost of $238,000. P8-2 Part 1 Required: 1. Applying the policies of Commonwealth Delivery, complete the following, indicating the effects for the preceding expenditures. Indicate the effects positive value for increase, negative value for decrease. Accumulated Depreciation Expense Repairs Expense Building Depreciation Cash Balance January 1 2$ 954,000 24 477,000 Depreciation Balance prior to expenditures 954,000 Expenditure a. Expenditure b.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements and flight equipment modifications are
capitalized when such costs are determined to extend the useful life of the asset or are part of the cost of acquiring the
asset. Expenditures for equipment overhaul costs of engines or airframes prior to their operational use are capitalized as
part of the cost of such assets as they are costs required to ready the asset for its intended use. Maintenance and repairs
costs are charged to expense as incurred...
Assume that Commonwealth Delivery made extensive repairs on an existing building and added a new wing. The building
is a garage and repair facility for delivery trucks that serve the Denver area. The existing building originally cost $954,000,
and by the end of last year, it was half depreciated based on use of the straight-line method, a 18-year estimated useful life
and no residual value. During the current year, the following expenditures related to the building were made:
a. Ordinary repairs and maintenance expenditures for the year, $14,000 cash.
b. Extensive and major repairs to the roof of the building, $132,000 cash. These repairs were completed at the end of the
current year.
c. The new wing was completed on December 31 of the current year at a cash cost of $238,000.
P8-2 Part 1
Required:
1. Applying the policies of Commonwealth Delivery, complete the following, indicating the effects for the preceding expenditures.
Indicate the effects positive value for increase, negative value for decrease.
Accumulated
Depreciation
Expense
Repairs
Expense
Building
Depreciation
Cash
Balance January 1
2$
954,000
24
477,000
Depreciation
Balance prior to expenditures
954,000
Expenditure a.
Expenditure b.
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