Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Question
Chapter 7, Problem 43E
To determine
Concept introduction:
Cost:
The cost is defined as any amount incurred by the company to acquire the asset and get the asset to set in place and ready for use. Any expenditures that are not included as part of the cost of the equipment are expenses and the other costs that are included are capitalized.
Requirement 1:
Determine the cost of the new dry cleaning machine.
To determine
Concept introduction:
Cost:
The cost is defined as any amount incurred by the company to acquire the asset and get the asset to set in place and ready for use. Any expenditures that are not included as part of the cost of the equipment are expenses and the other costs that are included are capitalized.
Requirement 2:
To explain why any expenditure is included or excluded from the cost of the machine.
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Situation 2: Malcolm Limited acquired a truck to deliver and install its specialized
products at the customer's site. The vehicle's list price was $135,000, but customization
added another $30,000 in costs. Malcolm took delivery of the truck on September 30,
2020, with a down payment of $15,000, signing a four-year, 8.0% note for the
remainder, payable in equal payments of $43,488 beginning September 30, 2021.
Malcolm expected the truck to be usable for 500 deliveries and installations. After that,
the product's technology would have changed and made the vehicle obsolete. In late
July 2023, the truck was destroyed when a concrete garage collapsed. Malcolm used
the truck for 45 deliveries in 2020, 125 in 2021, 134 in 2022, and 79 in 2023. The
company received a cheque for $12,000 from the insurance company and paid what
remained on the note.
Required #2:
Prepare all entries that are needed to record the events and activities related to the
truck, the note, and its interest, including…
Interest During Construction
Snowbird Company is constructing a building that qualifies for interest capitalization. It is built between January 1 and December 31, 2019. Snowbird made the following
expenditures related to this building:
April 1
$396,000
July 1
400,000
September 1
510,000
December 1 120,000
The company borrowed $500,000 at 12% to help finance the project. In addition, Snowbird had outstanding borrowings of $2 million at 8% and $1 million at 9%.
Required:
1. Compute the amount of interest capitalized related to the construction of the building. Do not round your interim calculations. Round your final answer to the
nearest dollar.
74,750
X
2. Next Level In the current period, the capitalization of interest decreases shareholders' equity
decreases depreciation expense
; in future period the effect of capitalized interest is to
Peach Company purchased a machine for P7, 000, 000 on Jan.1, 2019 and received a
government grant of P1,000,000 toward the capital cost. The machine is to be depreciated on
a straight line basis over 5 years and estimated to have a residual value of P500,000 at the end
of this period.
Required:
Prepare all journal entries for the year 2019 assuming the government grant is accounted for
as:
1. Deferred income
2. Deduction from the cost of the asset
Chapter 7 Solutions
Cornerstones of Financial Accounting
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - How does the cost concept affect accounting for...Ch. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - What factors must be known or estimated in order...Ch. 7 - How do the accelerated and straight-line...Ch. 7 - Prob. 9DQCh. 7 - Prob. 10DQ
Ch. 7 - Prob. 11DQCh. 7 - Prob. 12DQCh. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - Prob. 17DQCh. 7 - Prob. 18DQCh. 7 - Prob. 1MCQCh. 7 - Prob. 2MCQCh. 7 - When depreciation is recorded each period, what...Ch. 7 - Prob. 4MCQCh. 7 - Refer to the information for Cox Inc. above. What...Ch. 7 - Refer to the information for Cox Inc. above. What...Ch. 7 - Which of the following statements is true...Ch. 7 - Normal repair and maintenance of an asset is an...Ch. 7 - Chapman Inc. purchased a piece of equipment in...Ch. 7 - Bradley Company purchased a machine for $34,000 on...Ch. 7 - Prob. 11MCQCh. 7 - Which of the following statements is true? a. The...Ch. 7 - Prob. 13MCQCh. 7 - Heston Company acquired a patent on January 1,...Ch. 7 - Prob. 15MCQCh. 7 - ( Appendix 7 A) Murnane Company purchased a...Ch. 7 - Prob. 17CECh. 7 - Prob. 18CECh. 7 - Straight-Line Depreciation Refer to the...Ch. 7 - Prob. 20CECh. 7 - Prob. 21CECh. 7 - Revision of Depreciation On January 1, 2017, Slade...Ch. 7 - Disposal of an Operating Asset On August 30,...Ch. 7 - Prob. 24CECh. 7 - Cost of Intangible Assets Advanced Technological...Ch. 7 - Prob. 26CECh. 7 - Prob. 27CECh. 7 - (Appendix 7A) Impairment Brown Industries had two...Ch. 7 - Prob. 29BECh. 7 - Acquisition Cost Desert State University installed...Ch. 7 - Depreciation Concepts Listed below are concepts...Ch. 7 - Depreciation Methods On January 1, 2019, Loeffler...Ch. 7 - Expenditures After Acquisition Listed below are...Ch. 7 - Revision of Depreciation On January 1, 2019, the...Ch. 7 - Disposal of an Operating Asset Jolie Company owns...Ch. 7 - Analyzing Fixed Assets Pitt reported the following...Ch. 7 - Prob. 37BECh. 7 - Prob. 38BECh. 7 - ( Appendix 7A) Impairment Listed below is...Ch. 7 - Prob. 40ECh. 7 - Prob. 41ECh. 7 - Prob. 42ECh. 7 - Prob. 43ECh. 7 - Cost of a Fixed Asset Colson Photography Service...Ch. 7 - Prob. 45ECh. 7 - Cost and Depreciation On January 1, 2019, Quick...Ch. 7 - Characteristics of Depreciation Methods Below is a...Ch. 7 - Prob. 48ECh. 7 - Depreciation Methods Clearcopy, a printing...Ch. 7 - Depreciation Methods Quick-as-Lightning, a...Ch. 7 - Inferring Original Cost Barton Construction...Ch. 7 - Choice Among Depreciation Methods Walnut Ridge...Ch. 7 - Revision of Depreciation On January 1, 2017,...Ch. 7 - Capital versus Revenue Expenditure Warrick Water...Ch. 7 - Expenditures After Acquisition The following...Ch. 7 - Expenditures After Acquisition Roanoke...Ch. 7 - Prob. 57ECh. 7 - Prob. 58ECh. 7 - Disposal of Fixed Asset Pacifica Manufacturing...Ch. 7 - Prob. 60ECh. 7 - Prob. 61ECh. 7 - Prob. 62ECh. 7 - Balance Sheet Presentation The following...Ch. 7 - Prob. 64ECh. 7 - Prob. 65ECh. 7 - Prob. 66ECh. 7 - Prob. 67ECh. 7 - Financial Statement Presentation of Operating...Ch. 7 - A Cost of a Fixed Asset Mist City Car Wash...Ch. 7 - Depreciation Methods Hansen Supermarkets purchased...Ch. 7 - Depreciation Schedules Wendt Corporation acquired...Ch. 7 - Expenditures After Acquisition Pasta, a restaurant...Ch. 7 - Prob. 73APSACh. 7 - Prob. 74APSACh. 7 - Prob. 75APSACh. 7 - Prob. 76APSACh. 7 - Prob. 68BPSBCh. 7 - Cost of a Fixed Asset Metropolis Country Club...Ch. 7 - Depreciation Methods Graphic Design Inc. purchased...Ch. 7 - Depreciation Schedules Dunn Corporation acquired a...Ch. 7 - Prob. 72BPSBCh. 7 - Prob. 73BPSBCh. 7 - Prob. 74BPSBCh. 7 - Prob. 75BPSBCh. 7 - Prob. 76BPSBCh. 7 - Prob. 77.1CCh. 7 - Prob. 77.2CCh. 7 - Prob. 78.1CCh. 7 - Prob. 78.2CCh. 7 - Prob. 79.1CCh. 7 - Prob. 79.2CCh. 7 - Prob. 79.3CCh. 7 - Prob. 80.1CCh. 7 - Prob. 80.2CCh. 7 - Prob. 80.3CCh. 7 - Prob. 80.4CCh. 7 - Prob. 80.5CCh. 7 - Prob. 80.6CCh. 7 - Prob. 80.7CCh. 7 - Prob. 80.8CCh. 7 - Comparative Analysis: Under Armour, Inc., versus...Ch. 7 - Prob. 81.2CCh. 7 - Comparative Analysis: Under Armour, Inc., versus...Ch. 7 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After...Ch. 7 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After...Ch. 7 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After...Ch. 7 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT After...
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