Page 439 - Accounting Principles (A Business Perspective)

10. Property, plant, and equipment

Laural had the property appraised. The appraised values were as follows: land, USD 576,000, and office building,
USD 384,000. The cost of clearing the land was USD 18,000. The building was remodeled at a cost of USD 76,800.
The cost of a new identical office building was estimated to be USD 432,000. Prepare a schedule showing the cost of

the assets acquired.
Exercise C Fine Company purchased a heavy machine to be used in its factory for USD 720,000, less a 2 per
cent cash discount. The company paid a fine of USD 3,600 because an employee hauled the machine over city
streets without securing the required permits. The machine was installed at a cost of USD 21,600, and testing costs
of USD 7,200 were incurred to place the machine in operation. Prepare a schedule showing the recorded cost of the
machine.
Exercise D A machine is acquired in exchange for 50 shares of Marley Corporation capital stock. The stock

recently traded at USD 400 per share. The machine cost USD 30,000 three years ago. At what amount should the
machine be recorded?
Exercise E Keely Company purchased some office furniture for USD 29,760 cash on 2009 March 1. It also paid
USD 480 cash for freight costs incurred. The furniture is being depreciated over four years under the straight-line
method, assuming a salvage value of USD 1,440. The company employs a calendar-year accounting period. On 2010
July 1, it spent USD 192 to refinish the furniture. Prepare journal entries for the Keely Company to record all of the
data, including the annual depreciation adjustments through 2010.
Exercise F On 2009 January 2, a new machine was acquired for USD 900,000. The machine has an estimated
salvage value of USD 100,000 and an estimated useful life of 10 years. The machine is expected to produce a total of

500,000 units of product throughout its useful life. Compute depreciation for 2009 and 2010 using each of the
following methods:
a. Straight line.
b. Units of production (assume 30,000 and 60,000 units were produced in 2009 and 2010, respectively).
c. Double-declining balance.
Exercise G Terrill Company finds its records are incomplete concerning a piece of machinery used in its plant.
According to the company records, the machinery has an estimated useful life of 10 years and an estimated salvage

value of USD 24,000. It has recorded USD 12,000 in depreciation each year using the straight-line method. If the
accumulated depreciation account shows a balance of USD 72,000, what is the original cost of the machinery and
how many years remain to be depreciated?
Exercise H Katherine Company purchased a machine on 2009 April 1, for USD 72,000. The machine has an
estimated useful life of five years with no expected salvage value. The company's accounting year ends on December
31.
Compute the depreciation expense for 2009 and 2010 under the double-declining-balance method.
Exercise I Australia Company purchased a machine for USD 3,200 and incurred installation costs of USD 800.
The estimated salvage value of the machine is USD 200. The machine has an estimated useful life of four years.

Compute the annual depreciation charges for this machine under the double-declining-balance method.
Exercise J Regal Company acquired a delivery truck on 2009 January 2, for USD 107,200. The truck had an
estimated salvage value of USD 4,800 and an estimated useful life of eight years. At the beginning of 2009, a
revised estimate shows that the truck has a remaining useful life of six years. The estimated salvage value changed
to USD 1,600.

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