17.On January 1, Barton Co. purchased land with a usable building on it for $425,000. At the time of purchase, the fair market values of the land and building were $170,000 and $340,000, respectively. What is the cost Barton should allocate to land?
18.On January 1, Summers Co. purchased equipment with a 10-year life and zero salvage value for $900,000. Summers uses the straight-line method on its financial statements and double-declining-balance method on its income tax returns. By what amount does the tax deduction for depreciation exceed depreciation expense on Summers’s income statements for each of the first two years?
19.Farmdale Company’s President purchased an extremely used automobile on November 1 by paying $2,000. He immediately had it towed to his mechanic who overhauled the auto in order to get the car ready to be safely driven. The cost of the tow was $40 and the initial overhaul was $1,500. While driving from his mechanic’s garage, he ran over a nail that punctured a tire and cost $35 to repair. Calculate the cost of the auto.
20.On April 1, Tarpon Co. made the following expenditures on its printing press:
Purchase of stapling attachment
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$8,000
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Installation of attachment
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2,000
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Cleaning and oiling press costs prior to renovation
|
1,000
|
Replacement parts for renovation of printing press
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1,000
|
Labor used in press renovation
|
3,000
|
The renovation increased the expected life and the attachment increased the productivity of the press. What are the total expenditures capitalized to the printing press?
21.On April 1, 2004, Cardot Co., which uses straight-line depreciation, purchased equipment for $60,000 with a useful life of 7 years and $4,000 salvage value. On April 1, 2008, the equipment was sold for $30,000. What gain should Cardot recognize as a result of this disposition?
Use the information that follows concerning Harrahs, Inc. to answer problems 22 through 24.
Harrahs Corporation purchased a dump truck at the beginning of 2008 at a cost of $60,000. The truck had an estimated life of 5 years and an estimated residual value of $5,000. On January 1, 2010, the company made major repairs of $3,000 to the truck that extended its life 2 more years. Starting with 2010, the truck has a remaining life of 5 years. The company uses the straight-line depreciation method.
22.How much is the book value of the truck to be reported on the balance sheet at the end of 2009?
23.What amount should be recorded as depreciation expense each year starting in 2010?
24.If Harrahs sells the truck at the end of 2010 for $20,000 cash, how much gain or loss would be recognized?