Intermediate Accounting
3 Excel spreadsheets in 1 workbook
You are a staff accountant in a CPA firm. Your manager has asked you to provide a report containing accounting information on the following 3 clients:
Global Inc. purchased a machine and incurred the following expenditures:
Purchase price | $20,000 |
Freight costs | $1,000 |
Sales tax | $2,000 |
Insurance on shipment | $200 |
Insurance for the first year on the machine | $500 |
Installation of the machine | $2,000 |
- Calculate the cost to be capitalized.
- Make an entry that will show which expenses will be capitalized when recording the machine on the books.
- Show the entry that will be recorded to expense the cost that will not be capitalized.
Brands Resources traded an old machine for a new machine. The book value of the old machine was $150,000 (original cost $320,000, less accumulated depreciation of $170,000). The fair value was $180,000. Brands Resources paid $20,000 to complete the exchange.
- Prepare the journal entry to record the exchange.
Reliable Company purchased a machine on January 1, 2008 at a net cost of $85,000. At the end of the 4-year life, it expects the machine will have a salvage value of $5,000. It also estimates that the machine will run for 10,000 hours during its 4-year life. The company has a fiscal year that ends on December 31.
Year | Machine hours |
2008 | 2,000 |
2009 | 3,000 |
2010 | 1,000 |
2011 | 4,000 |
- Calculate the depreciation under the straight line method.
- Calculate the depreciation under the double declining method.
- Calculate the depreciation under the units of production method.