ACCT 001 Lecture Notes - Lecture 2: Sales Tax, Property Insurance, Title Search

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blackpig616

29 May 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

williams

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Document Summary

Tangible assets: property, plant, land, land improvements, buildings, equipment, and natural resources. Recording all such long-term assets: cost plus all expenditures necessary to get the asset ready for use. ** initial cost of long-term asset>its purchase price; include any additional amounts the firm paid to bring the asset to its desired condition and location for use** Record it as asset first then allocation that cost as an expense over the future periods. Recording it as an expense of the current period. ** choice depends on whether the company benefits from having the assets ** Company use in its operation (land purchased for investments is recorded in a separate investment acc) Assume, for instance, that olive garden, a restaurant chain owned by. Darden restaurants purchases a two-acre tract of land and an existing building for ,000. The company plans to remove the existing building and construct a new olive garden restaurant on the site.

Related Questions

1, The term capitalize means to record an expenditure as an expense. True or False.

2, Cash received from the sale of salvaged materials increase the total recorded cost of the land. T or F

3, Most if the costs associated with internally developed intangible assets are recorded as intangible assets on the balance sheet. T or F

4, Goodwill is recorded as an intangible asset on the balance sheet only when it is purchased as part of the acquisition cost of another company. T or F

5, Book value is equal to the original cost of the asset less the toal balance in accumulated depreciation. T or F

6, Impairment occurs when the future cash flows geerated for a long-term asset fall below its fair value. T or F

7, Circle Co purchased a piece of equipment by paying $10,000 cash. There was a shipping cost of $1,200 and a renovation cost of $3,200 to the building to get the space ready for the installation. There was also an installation cost of $1,000. What should be the recorded cost of this piece of equipment?

oliveraven558

In January 2013, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $579,500, with a useful life of 20 years and an $90,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $549,000 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,921,500. The company also incurs the following additional costs:


Cost to demolish Building 1	$	338,400
Cost of additional land grading		187,400
Cost to construct new building (Building 3), having a useful life of 25 years and a $400,000 salvage value		2,282,000
Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value		173,000

value:
10.00 points

Required information

Required:

1.	Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

Allocation of purchase price	Appraised Value	Percent of Total Appraised Value	x	Total cost of acquisition	=	Apportioned Cost
Land			x		=
Building 2			x		=
Land Improvements 1			x		=
Totals

	Land	Building 2		Building 3		Land Improvements 1	Land Improvements 2
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements cost
Totals

Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.

2.Journal entry worksheet

Record the costs of the plant assets.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Jan 01

3.	Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.

Record the year-end adjusting entry for the depreciation expense of Building 2.

Date	General Journal	Debit	Credit
Dec 31

carminesea-lion120

China Express purchased land for $140,000. Prior to construction on the new building, the land had to be cleared of trees and brush. Construction costs incurred during the first year are listed below:

Land clearing costs	$ 5,000
Architect fees (for new building)	30,000
Legal fees for title investigation of land	1,000
Property taxes on land (for the first year)	2,500
Building construction costs	440,000

Required:
Determine the amounts that should be recorded in the land and the new building accounts.

2. Diamond Autobody purchased some new equipment. The new equipment cost $90,000. The company estimates the equipment will have a residual value of $10,000. Cheetah Copy also estimates it will use the equipment for four years or about 5,000 total hours.

Required:

Prepare a depreciation schedule for three years using the following methods:

1. Straight-line.
2. Double-declining-balance.
3. Activity-based. Actual use per year was as follows:

Year	Hours Used
1	1,200
2	1,400
3	1,500
4	1,100

3. The Snack Stop had the following long-term asset balances as of January 1, 2015:

	Cost	Accumulated Depreciation	Book Value
Land	$90,000	â	$90,000
Building	600,000	($60,000)	540,000
Equipment	200,000	(72,000)	128,000

All of the assets were purchased at the beginning of 2013. The building is depreciated over a 20-year service life using the straight-line method and estimating no residual value. The equipment is depreciated over a 10-year useful life using the double-declining-balance method with an estimated residual value of $10,000. Depreciation has already been calculated for the first two years.

Required:

1. For the year ended December 31, 2015, record depreciation expense for buildings and equipment. Land is not depreciated.

2. Calculate the book value for each of the four long-term assets at December 31, 2015.

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ACCT 001 Lecture Notes - Lecture 2: Sales Tax, Property Insurance, Title Search

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