ACC 291 Week 2
E9-1
The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011.
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions
(a) Explain the application of the cost principle in determining the acquisition cost of plant assets.
Pg. 402
Depreciation is the application of the cost principle in determining the acquisition cost of plant assets. This application applies the classes: land improvements, buildings, and equipment. To determine the acquisition cost of plant assets should be stated at the market value. It would also be reported on the balance sheet as a deduction. Depreciation of plant assets are determined on the assets wear and tear. As it gets older the less it is worth at market value. When computing the depreciation there are three factors that are needed: cost, useful life, and salvage value.
Cost- the cost of the depreciable asset
Useful life- how long it is estimated to work productively
Salvage value- estimated value at the end of its useful life (trade-in value)
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited.
Pg. 399
1. Land
2. Equipment
3. Equipment
4. Land Improvements
5. Equipment
6. Equipment
7. Equipment
8. Equipment
E9-7
Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck has an expected salvage
The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011.
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions
(a) Explain the application of the cost principle in determining the acquisition cost of plant assets.
Pg. 402
Depreciation is the application of the cost principle in determining the acquisition cost of plant assets. This application applies the classes: land improvements, buildings, and equipment. To determine the acquisition cost of plant assets should be stated at the market value. It would also be reported on the balance sheet as a deduction. Depreciation of plant assets are determined on the assets wear and tear. As it gets older the less it is worth at market value. When computing the depreciation there are three factors that are needed: cost, useful life, and salvage value.
Cost- the cost of the depreciable asset
Useful life- how long it is estimated to work productively
Salvage value- estimated value at the end of its useful life (trade-in value)
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited.
Pg. 399
1. Land
2. Equipment
3. Equipment
4. Land Improvements
5. Equipment
6. Equipment
7. Equipment
8. Equipment
E9-7
Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck has an expected salvage