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Prepare the appropriate journal entry if MX paid 20% cash for this transaction and financed the rest for 4 years.

05 / 03 / 2018 Assignment

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MX Corp purchased assets for a lump sum price of
$4,000,000. The assets purchased had an appraised value of:

Equipment

$1,200,000

Land

$2,000,000

Building

$1,800,000

Prepare
the appropriate journal entry if MX paid 20% cash for this transaction and
financed the rest for 4 years.

Credit Company
incurred the following costs in acquiring plant assets:

a. Purchased
land for a $50,000 down payment and signed a $100,000 note payable for the
balance

b. Delinquent
property tax of $2,500 and legal fees of $1,500

c. $5,000
to remove an unwanted building

d. Architect
fee of $2,000 for the design of a building

e. Constructed
an office building at a cost of $500,000

f. Interest
cost on construction loan for the building, $20,000

g. $7,500
for fencing, $4,000 for landscaping, and $5,000 for lighting

Determine the cost of the land,
land improvements, and building.

7.1-53
ABC, Inc. purchased new machinery in order to improve its production process.
Classify each of the following expenditures as a capital expenditure (CE) or an
immediate expense (IE):

A)
Purchase
price

B)
Sales
tax paid on the purchase price

C)
Transportation
costs

D)
Installation

e.
Training
of personnel for initial operation of the machinery

f.
Wages
paid to employees that operate the machinery during production

g.
Periodic
lubrication after the machinery is placed in service

h.
Ordinary
repairs to maintain the machinery in working order

i.
Major
overhaul to extend the useful life

17

7.1-54 Determine the cost
of the land, based upon the following data:


Purchase price of
the land

$210,000

Survey fees

1,000

Commission

20,000

Payment for
demolition of old building on land

30,000

Back property taxes

2,000

Paving parking lot

40,000

Fencing

15,000

7.1-55 Determine the cost of the machine, based upon
the following data:

Purchase
price of the machine

$10,000

Sales
tax on the machine

1,000

Freight on the machine

1,500

Normal
repairs to the machine after it has been in use

800

Special
base needed for the machine installation

2,000

7.2-1 Depreciation is:

A) a process
of valuation.

B) the
setting aside of cash to replace assets as they wear out.

C) the
allocation of a plant asset’s cost to expense over its life.

D) not
calculated for assets that are appreciating in value.

The Accumulated
Depreciation account represents a contra-revenue account.

7.2-3 Obsolescence may cause an asset’s useful
life to be longer than the asset’s physical life.

7.2-4 When using the units-of-production depreciation method, the
asset’s actual cost is used in computing the first year of depreciation.

7.2-5 Book value equals the cost of the asset less
the total accumulated depreciation.


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