Short Problems
1.Lincoln Co. purchased a piece of property (land and building) at a tax sale for $110,000. Reliable estimates of the fair market values of the land and building are $34,000 and $70,000, respectively. What is the gain that Lincoln Co. should record from this advantageous purchase?
2.On December 1, Dominican Corp. purchased a tract of land for $325,000 to be used as a factory site. An old unusable building on the land was razed (torn down), and the salvaged materials from the demolition were sold. These cash expenditures and receipts and other costs incurred during December are as follows:
Demolition of old building
|
$11,000
|
Proceeds from sale of salvaged materials
|
5,000
|
Legal fees to transfer land title
|
3,000
|
Title guarantee insurance
|
1,000
|
Calculate the balance in Dominican’sLand
account on its December 31 balance sheet.
3.Land and a building were purchased for $90,000. A reliable market value of the land is $40,000 and for the building, $80,000. What are the separate costs assigned to the land and building?
4.Apple Inc. purchased a used pickup truck with an advertised price of $18,900 for $17,000 cash. While Jeff, the CEO, was driving the truck to get supplies, he was stopped by a highway patrol woman and received a $50 speeding ticket and a warning for a nonfunctioning brake light. Jeff had failed to notice when this problem when he purchased the truck. If Jeff knew about the brake light condition, he would have paid only $16,500 for the car. The cost, not under warranty, of replacing the brake light was $50. Calculate the cost to be capitalized to the truck account.
5.Arnez Company purchased a building and equipment for $110,000. Although a reliable market value of the building could not be determined, the equipment's market value is $70,000. What are the separate costs assigned to the building and equipment?
6.On January 1, Hampton Company paid $48,000 for a new delivery truck. It was estimated that the truck would be driven 100,000 miles during the next 5 years, at which time it would have a salvage value of $3,000. During the first and second years, the odometer registered 22,000 and 40,000 miles, respectively. How much is accumulated depreciation using the activity (miles driven) method at the end of year 2?
7.On January 1, 2008, Blackwell Company paid $88,000 for a new delivery truck. It was estimated that the truck would be driven 300,000 miles during the next 6 years, at which time it would have a salvage value of $7,000. At the end of the first and second years, the odometer registered 48,000 and 88,000 miles, respectively. Show how the plant asset would appear in Blackwell Company’s balance sheet at December 31, 2009 assuming the company uses the activity method depreciation.
8.Harvey Ltd. purchased land and building in exchange for 50,000 shares of its stock that is trading on the New York Stock Exchange at $20 a share. Although the market values of the purchased assets are unknown, the current assessed value of the land is $300,000 and the building is $600,000. How much is assigned to the land and to the building?