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    HW 8

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    Mishalm96
    The document contains three exercises dealing with accounting for costs and depreciation of assets. Exercise 1 lists costs incurred by Benedict Company and indicates which accounts they would be debited to. Exercise 2 calculates the cost of land purchased by Westmorlan Company and indicates which accounts other costs would be debited to. Exercise 3 provides information about a truck purchased by Linton Company and calculates depreciation expense for the truck using different depreciation methods for years 2019 and 2020. It also includes a journal entry to record 2019 depreciation under the straight-line method and a partial balance sheet as of December 31, 2019.

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    HW 8

    Uploaded by

    Mishalm96
    205 views4 pages
    The document contains three exercises dealing with accounting for costs and depreciation of assets. Exercise 1 lists costs incurred by Benedict Company and indicates which accounts they would be debited to. Exercise 2 calculates the cost of land purchased by Westmorlan Company and indicates which accounts other costs would be debited to. Exercise 3 provides information about a truck purchased by Linton Company and calculates depreciation expense for the truck using different depreciation methods for years 2019 and 2020. It also includes a journal entry to record 2019 depreciation under the straight-line method and a partial balance sheet as of December 31, 2019.

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    Accounting I

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    hw 8

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    The document contains three exercises dealing with accounting for costs and depreciation of assets. Exercise 1 lists costs incurred by Benedict Company and indicates which accounts they would be debited to. Exercise 2 calculates the cost of land purchased by Westmorlan Company and indicates which accounts other costs would be debited to. Exercise 3 provides information about a truck purchased by Linton Company and calculates depreciation expense for the truck using different depreciation methods for years 2019 and 2020. It also includes a journal entry to record 2019 depreciation under the straight-line method and a partial balance sheet as of December 31, 2019.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    205 views4 pages

    HW 8

    Uploaded by

    Mishalm96
    The document contains three exercises dealing with accounting for costs and depreciation of assets. Exercise 1 lists costs incurred by Benedict Company and indicates which accounts they would be debited to. Exercise 2 calculates the cost of land purchased by Westmorlan Company and indicates which accounts other costs would be debited to. Exercise 3 provides information about a truck purchased by Linton Company and calculates depreciation expense for the truck using different depreciation methods for years 2019 and 2020. It also includes a journal entry to record 2019 depreciation under the straight-line method and a partial balance sheet as of December 31, 2019.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Mishal Mustafa

    BTA111
    Prof. Wu
    Exercise Eight
    Exercise #1: Benedict Company incurred the following costs.
    1. Sales tax on factory machinery purchased $ 5,000
    2. Painting of and lettering on truck immediately upon purchase 700
    3. Installation and testing of factory machinery 2,000
    4. Real estate broker’s commission on land purchased 3,500
    5. Insurance premium paid for first year’s insurance on new truck 880
    6. Cost of landscaping on property purchased 7,200
    7. Cost of paving parking lot for new building constructed 17,900
    8. Cost of clearing, draining, and filling land 13,300
    9. Architect’s fees on self-constructed building 10,000

    Indicate to which account Benedict would debit each of the costs.


    1. Equipment account would be debited.
    2. Equipment account would be debited.
    3. Equipment account would be debited.
    4. Land account would be debited.
    5. Prepaid Insurance account will be debited.
    6. Land improvement account will be debited.
    7. Land improvement account will be debited.
    8. Land account would be debited.
    9. Building account would be debited.

    Exercise #2: On March 1, 2019, Westmorlan Company acquired real estate on which it
    planned to construct a small office building. The company paid $75,000 in cash. An old
    warehouse on the property was razed at a cost of $8,600; the salvaged materials were sold
    for $1,700. Additional expenditures before construction began included $1,100 attorney’s
    fee for work concerning the land purchase, $5,000 real estate broker’s fee, $7,800
    architect’s fee, and $14,000 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 debited.

    a)
    Particulars Cost
    Cash Paid for acquiring land $75,000

    Add:
    Cost of razing the old warehouse $8,600
    Less: Proceeds from sale of salvaged materials $1,700 $6,900
    Attorney’s fee for land purchase $1,100
    Real Estate Brokers Fee $5,000
    Total Cost of Land $88,000

    Total cost of land is $88,000.


    b) Architects fee ($7,800) debited to the Building Account.
    Driveways and Parking Lots ($14,000) debited to Land Improvements l

    Exercise #3: Linton Company purchased a delivery truck for $34,000 on January 1, 2019.
    The truck has an expected salvage value of $2,000, and is expected to be driven 100,000
    miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2019 and
    12,000 in 2020.
    Instructions
    (a) Compute depreciation expense for 2019 and 2020 using (1) the straight-line method, (2)
    the units-of-activity method, and (3) the double-declining-balance method.
    (b) Assume that Linton uses the straight-line method.
    (1) Prepare the journal entry to record 2019 depreciation.
    (2) Show how the truck would be reported in the December 31, 2019, balance sheet.

    a)
    Depreciation Schedule (Straight Line Method)
    Year Beginning Book Balance (A) Depreciation Expense (B) Ending Book Balance (A-
    B)
    2019 $34,000 $4,000 $30,000
    2020 $30,000 $4,000 $26,000

    Depreciation Schedule (Units of Activity Method)


    Year Actual Miles Driven (A) Depreciation Expense per mile (B) Depreciation expenses
    (A-B)
    2019 15,000 $0.32 $4,800
    2020 12,000 $0.32 $3,840

    Depreciation Schedule (Double Declining Balance Method)


    Year Beginning Book Depreciation Depreciation Ending Book
    Balance (A) Rate (B) Expenses C= Balance (A-C)
    A*B
    2019 $34,000 25.00% $8,500 $25,500
    2020 $25,500 25.00% $6,375 $19,125

    b)
    Account Titles & Explanation Debit Credit
    Depreciation Expenses (SE-) $4,000
    Accumulated Depreciation (AX+) $4,000
    (Record the amount for depreciation expenses under straight line method)
    L Company
    Partial Balance Sheet
    December 31, 2019
    Delivery Truck $34,000
    Less: Accumulated Depreciation $ 4,000
    Delivery truck as on December 31, 2019 $30,000

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