Fundamental Accounting Principles Volume 2 17th Edition By Kermit D. Larson test bank
A) $7,830
B) $6,525
C) $8,040
D) $6,700
E) $6,250
66) On January 1, 2023, PetraCo ordered a new machine to help increase production for one of its most popular products. The machine had an invoice price of $30,000 and PetraCo was required to pay shipping ($1,200) and insurance during shipping ($300) by boat from British Columbia to Toronto. The machine arrived on January 5, 2023 and was installed at a cost of $800 and calibrated and tested for a cost of $200. On February 1, 2023 it was put into operation. PetraCo's fiscal year runs from January to December. Round all final answers to the nearest dollar.
66.1) Prepare a journal entry (or entries) to record all costs associated with the new machine
66.2) The machine was expected to last 10 years with a salvage value of $2,500. Prepare the journal entry to record depreciation for 2023 using the double-declining balance method of depreciation.
66.3) Petra Co. sold the machine on July 1, 2024 for $19,000. Prepare all journal entries required by HRO in 2024 relating to the machine and its disposal.
67) High Quality Company's president would like to set up an amount of goodwill on its balance sheet as an intangible asset for 2022. The president believes that this internally created goodwill in the amount of $1,500,000 is justified as the company has been in business for over five years and has excellent competitive advantages including superior products, skilled workforce and customer loyalty. What will you tell the president?
68) Deep Mining Company estimates that there will be 250,000 tons of available iron ore to be mined in a mineral deposit purchased for $1,100,000. Salvage value is expected to be $100,000.
If 90,000 tons are mined and sold in 2022, what is total depletion charge for the year?
69) Discuss the four issues in accounting for property, plant and equipment.
70) Explain the difference between revenue and capital expenditures and how they are recorded in the accounting system.
71) Mandy Manufacturing purchased a machine on August 1, 2021, and it was installed and ready to run on January 1, 2022. The following costs were incurred in the purchase and installation of the machine.
Invoice Price
$1,400,000
Freight costs
8,000
Purchase discount
3,000
Installation costs
68,000
Electrical and power connections
33,000
Repairs to correct damage incurred during uncrating
13,000
Adjustments costs
46,000
Spare parts for future use
26,000
Provincial sales tax
84,000
Fines incurred during the transport and uploading of the machine
100
Cost of special foundation for the machine
7,000
Calculate the depreciable cost of the machine.
72) Primadonna Company paid $870,000 plus $10,000 in legal costs for a parcel of real estate. This included land appraised at $450,000; land improvements appraised at $170,000; and a building appraised at $380,000. The plan is to use the building as a manufacturing plant. Determine the amounts that should be debited to:
(a) Land
$ __________
(b) Land Improvements
$ __________
(c) Building
$ __________
73) Prepare journal entries to record the following transactions of Salem Sales Co. during the current year:
Mar 1
Purchased a truck for $60,000 with a 6 year useful life and a $10,000 residual value. Salem also paid 7% provincial sales tax, a $500 annual truck license, $4,000 to paint the truck and $2,300 for spare parts. All payments were in cash.
Mar 12
Purchased a garage from a neighbouring business with a $60,000 note payable. The seller’s book value for the garage was $57,000 and the garage was appraised at $68,000. The estimated useful life is 12 years. Salem also paid a $4,000 cash for real estate commission.