The following events took place at Pete's Painting Company during 2016: On January 1, Pete bought a used truck for $16,000. He added a tool chest and side racks for ladders for $5,400. The truck is expected to last four years and then be sold for $1,000. Pete uses straight-line depreciation. On January 1, he purchased several items at an auction for $4,200. These items had fair market values as follows: 10 cases of paint trays and roller covers $200 Storage cabinets 1,800 Ladders and scaffolding 3,600 Pete will use all of the paint trays and roller covers this year. The storage cabinets are expected to last nine years; the ladders and scaffolding, four years. On February 1, Pete paid the city $1,476 for a three-year license to operate the business. On September 1, Pete sold an old truck for $5,780 that had cost $14,720 when it was purchased on September 1, 2011. It was expected to last eight years and have a salvage value of $800. Required: 1. For each situation, determine the value assigned to the asset when it is purchased [or for (d), the book value when sold]. Do not round intermediate calculations. If required, round your final answers to the nearest dollar. Asset Relevant Value a. Recorded cost of truck b. Part 1 - recorded amount of supplies b. Part 2 - recorded cost of office furniture b. Part 3 - recorded cost of equipment c. Recorded cost of prepaid license d. Book value of truck at time of sale 2. Determine the amount of depreciation or other expense to be recorded for each asset for 2016. Do not round intermediate calculations. If required, round your final answers to the nearest dollar. Asset 2016 Expense Amount a. Truck depreciation b. Part 1 - supplies expense b. Part 2 - office furniture depreciation b. Part 3 - equipment depreciation c. License amortization d. Part 1 - old truck depreciation d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss) Determine value at time of purchase. Use the fair market values of the supplies expense, office furniture and equipment at the time of purchase. Determine value of prepaid license. Compute the amount of the prepaid license expense that is used in the current year. Compute book value of the truck at the time of sale. 3. How would these assets appear on the balance sheet as of December 31, 2016? Pete's Painting Company Balance Sheet (Partial) December 31, 2016 Current assets: Prepaid license Property, plant, and equipment: Truck Office furniture Equipment Less: Accumulated depreciation Property, plant, and equipment, net

The following events took place at Pete's Painting Company during 2016: On January 1, Pete bought a used truck for $16,000. He added a tool chest and side racks for ladders for $5,400. The truck is expected to last four years and then be sold for $1,000. Pete uses straight-line depreciation. On January 1, he purchased several items at an auction for $4,200. These items had fair market values as follows: 10 cases of paint trays and roller covers $200 Storage cabinets 1,800 Ladders and scaffolding 3,600 Pete will use all of the paint trays and roller covers this year. The storage cabinets are expected to last nine years; the ladders and scaffolding, four years. On February 1, Pete paid the city $1,476 for a three-year license to operate the business. On September 1, Pete sold an old truck for $5,780 that had cost $14,720 when it was purchased on September 1, 2011. It was expected to last eight years and have a salvage value of $800. Required: 1. For each situation, determine the value assigned to the asset when it is purchased [or for (d), the book value when sold]. Do not round intermediate calculations. If required, round your final answers to the nearest dollar. Asset Relevant Value a. Recorded cost of truck b. Part 1 - recorded amount of supplies b. Part 2 - recorded cost of office furniture b. Part 3 - recorded cost of equipment c. Recorded cost of prepaid license d. Book value of truck at time of sale 2. Determine the amount of depreciation or other expense to be recorded for each asset for 2016. Do not round intermediate calculations. If required, round your final answers to the nearest dollar. Asset 2016 Expense Amount a. Truck depreciation b. Part 1 - supplies expense b. Part 2 - office furniture depreciation b. Part 3 - equipment depreciation c. License amortization d. Part 1 - old truck depreciation d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss) Determine value at time of purchase. Use the fair market values of the supplies expense, office furniture and equipment at the time of purchase. Determine value of prepaid license. Compute the amount of the prepaid license expense that is used in the current year. Compute book value of the truck at the time of sale. 3. How would these assets appear on the balance sheet as of December 31, 2016? Pete's Painting Company Balance Sheet (Partial) December 31, 2016 Current assets: Prepaid license Property, plant, and equipment: Truck Office furniture Equipment Less: Accumulated depreciation Property, plant, and equipment, net

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation

The following events took place at Pete's Painting Company during 2016:

On January 1, Pete bought a used truck for $16,000. He added a tool chest and side racks for ladders for $5,400. The truck is expected to last four years and then be sold for $1,000. Pete uses straight-line depreciation.
On January 1, he purchased several items at an auction for $4,200. These items had fair market values as follows:

10 cases of paint trays and roller covers $200

Storage cabinets 1,800

Ladders and scaffolding 3,600

Pete will use all of the paint trays and roller covers this year. The storage cabinets are expected to last nine years; the ladders and scaffolding, four years.
On February 1, Pete paid the city $1,476 for a three-year license to operate the business.
On September 1, Pete sold an old truck for $5,780 that had cost $14,720 when it was purchased on September 1, 2011. It was expected to last eight years and have a salvage value of $800.

Required:

1. For each situation, determine the value assigned to the asset when it is purchased [or for (d), the book value when sold]. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

Asset	Relevant Value
a. Recorded cost of truck
b. Part 1 - recorded amount of supplies
b. Part 2 - recorded cost of office furniture
b. Part 3 - recorded cost of equipment
c. Recorded cost of prepaid license
d. Book value of truck at time of sale

2. Determine the amount of depreciation or other expense to be recorded for each asset for 2016. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

Asset	2016 Expense Amount
a. Truck depreciation
b. Part 1 - supplies expense
b. Part 2 - office furniture depreciation
b. Part 3 - equipment depreciation
c. License amortization
d. Part 1 - old truck depreciation
d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss)

Determine value at time of purchase. Use the fair market values of the supplies expense, office furniture and equipment at the time of purchase. Determine value of prepaid license.

Compute the amount of the prepaid license expense that is used in the current year. Compute book value of the truck at the time of sale.

3. How would these assets appear on the balance sheet as of December 31, 2016?

Pete's Painting Company
Balance Sheet (Partial)
December 31, 2016
Current assets:
Prepaid license
Property, plant, and equipment:
Truck
Office furniture
Equipment

Less: Accumulated depreciation
Property, plant, and equipment, net

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10 cases of paint trays and roller covers	$200
Storage cabinets	1,800
Ladders and scaffolding	3,600