B-10.01 The following selected account balances were taken from the general ledger of Vance Corporation as of December 31, 20X7. Examine this information and prepare the property, plant & equipment section of the company's balance sheet. All accounts listed carry a normal balance.Land$ 500,000Buildings1,650,000Equipment2,860,000Accumulated depreciation: Buildings472,000Accumulated depreciation: Equipment1,333,400Depreciation expense: Buildings125,000Depreciation expense: Equipment278,111 &R&"Myriad Web Pro,Bold"&20B-10.01 B-10.01 Worksheet B-10.01 Property, Plant & Equipment &L&"Myriad Web Pro,Bold"Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-10.01 B-10.01 B-10.02Sonjay Motors recently purchased a new sign to be erected in front of its dealership. The sign company that produced the sign had a standard price for this item at $25,000, but Sonjay was able to negotiate a 20% discount from standard. In addition, the sign company paid $1,200 of freight costs to deliver the sign to Sonjay. Sonjay hired an electrician for $1,300 to wire the new sign's lighting. In addition, Sonjay rented a crane for $800 and paid an installation crew $1,600 to erect the sign. The city required Sonjay to pay a one-time sign inspection fee of $500. Furthermore, Sonjay had to obtain an annual permit at a cost of $50 for the first year. During installation, the crew accidentally damaged an adjoining neighbor's landscaping, and Sonjay paid $750 to clean and repair those problems.Determine the correct cost allocation to the sign, and prepare a journal entry to reflect the total expenditures related to this acquisition. B-10.02 Worksheet B-10.02The sign cost is computed as follows:GENERAL JOURNAL DateAccountsDebitCredit B-10.02 B-10.03Evaluate the following costs and decide if each is a "capital expenditure" or not. Then, if a capital expenditure, decide which account the cost should be recorded in: Land, Land Improvement, Building, or Equipment. The first item is done as an example.CapitalCategoryYesNoLandLand ImprovementBuildingEquipmentDelivery cost of new furniture✓✓Wages paid to guard at office buildingFees for title insurance on land purchaseCost of periodic repainting of parking lotCost of building new sidewalksInterest costs on loan to buy equipmentComputer training class on general commercial software packageInterest cost on loan during construction period for new buildingArchitects fees for new buildingInstallation and setup costs on new machineryRepair of damage to device broken during initial installationSafety violation fines at construction siteTap fees for connecting new building to city water system B-10.03 Worksheet B-10.03CapitalCategoryYesNoLandLand ImprovementBuildingEquipmentDelivery cost of new furniture✓✓Wages paid to guard at office buildingFees for title insurance on land purchaseCost of periodic repainting of parking lotCost of building new sidewalksInterest costs on loan to buy equipmentComputer trai ...

1. B-10.01 The following selected account balances were taken
from the general ledger of Vance Corporation as of December
31, 20X7. Examine this information and prepare the property,
plant & equipment section of the company's balance sheet. All
accounts listed carry a normal balance.Land$
500,000Buildings1,650,000Equipment2,860,000Accumulated
depreciation: Buildings472,000Accumulated depreciation:
Equipment1,333,400Depreciation expense:
Buildings125,000Depreciation expense: Equipment278,111
&R&"Myriad Web Pro,Bold"&20B-10.01
B-10.01
Worksheet B-10.01 Property, Plant & Equipment
&L&"Myriad Web Pro,Bold"Name:
Date: Section: &R&"Myriad Web
Pro,Bold"&20B-10.01
B-10.01
B-10.02Sonjay Motors recently purchased a new sign to be
erected in front of its dealership. The sign company that
produced the sign had a standard price for this item at $25,000,
but Sonjay was able to negotiate a 20% discount from standard.
In addition, the sign company paid $1,200 of freight costs to
deliver the sign to Sonjay. Sonjay hired an electrician for
$1,300 to wire the new sign's lighting. In addition, Sonjay
rented a crane for $800 and paid an installation crew $1,600 to
erect the sign. The city required Sonjay to pay a one-time sign
inspection fee of $500. Furthermore, Sonjay had to obtain an
annual permit at a cost of $50 for the first year. During
installation, the crew accidentally damaged an adjoining
neighbor's landscaping, and Sonjay paid $750 to clean and
repair those problems.Determine the correct cost allocation to
the sign, and prepare a journal entry to reflect the total
expenditures related to this acquisition.
B-10.02

2. Worksheet B-10.02The sign cost is computed as
follows:GENERAL JOURNAL DateAccountsDebitCredit
B-10.02
B-10.03Evaluate the following costs and decide if each is a
"capital expenditure" or not. Then, if a capital expenditure,
decide which account the cost should be recorded in: Land,
Land Improvement, Building, or Equipment. The first item is
done as an example.CapitalCategoryYesNoLandLand
ImprovementBuildingEquipmentDelivery cost of new
furniture✓✓Wages paid to guard at office buildingFees for title
insurance on land purchaseCost of periodic repainting of
parking lotCost of building new sidewalksInterest costs on loan
to buy equipmentComputer training class on general commercial
software packageInterest cost on loan during construction
period for new buildingArchitects fees for new
buildingInstallation and setup costs on new machineryRepair of
damage to device broken during initial installationSafety
violation fines at construction siteTap fees for connecting new
building to city water system
B-10.03
Worksheet B-10.03CapitalCategoryYesNoLandLand
ImprovementBuildingEquipmentDelivery cost of new
furniture✓✓Wages paid to guard at office buildingFees for title
insurance on land purchaseCost of periodic repainting of
parking lotCost of building new sidewalksInterest costs on loan
to buy equipmentComputer training class on general commercial
software packageInterest cost on loan during construction
period for new buildingArchitects fees for new
buildingInstallation and setup costs on new machineryRepair of
damage to device broken during initial installationSafety
violation fines at construction siteTap fees for connecting new
building to city water system
B-10.04CityBank recently held an auction to dispose of various
assets it had obtained through foreclosures and other loan
settlements. Representatives of Advantage Metals attended the
auction to bid on an abandoned manufacturing plant that

3. CityBank included in the sale. The auction brochure listed the
manufacturing plant as including all land, buildings, and
equipment. The brochure indicated that an independent
appraisal had been conducted and that land was separately
valued at $1,000,000, the building at $2,000,000, and the
equipment at $4,000,000. This information is believed to be
reasonably accurate and fair.Advantage Metals wanted the site
for a recycling business it planned to start at the location. All
of the equipment would be used in this new operation. The
minimum bid price was set at $4,900,000. As it turned out, the
auction was poorly attended. Advantage was only the only
bidder on this property, and was fortunate to acquire the
property at the opening bid minimum.Determine the correct cost
allocation to the land, buildings, and equipment, and prepare a
journal entry to reflect this acquisition.
B-10.04
Worksheet B-10.04GENERAL
JOURNAL DateAccountsDebitCredit
B-10.04
B-10.05Evaluate the following features or comments and decide
if the description would pertain to a capital lease or an
operating lease.Operating LeaseCapital LeaseThe lessee reports
the leased asset on its balance sheet✓Payments are reported
fully as rent expenseOwnership of the property passes to the
lessee by the end of the lease termThe lease term is at least 75%
of the remaining life of the propertyInterest expense is
measured and reported by the lesseeDepreciation of the leased
asset is not reported by the lesseeAt the inception of the lease,
the lessee records both an asset and liabilityThe lessee reports a
liability for the present value of all future payments anticipated
under the lease agreementThe lessor continues to report the
tangible asset covered by the lease on its balance sheet
B-10.05
Worksheet B-10.05Operating LeaseCapital LeaseThe lessee
reports the leased asset on its balance sheet✓Payments are
reported fully as rent expenseOwnership of the property passes

4. to the lessee by the end of the lease termThe lease term is at
least 75% of the remaining life of the propertyInterest expense
is measured and reported by the lesseeDepreciation of the
leased asset is not reported by the lesseeAt the inception of the
lease, the lessee records both an asset and liabilityThe lessee
reports a liability for the present value of all future payments
anticipated under the lease agreementThe lessor continues to
report the tangible asset covered by the lease on its balance
sheet
B-10.05
B-10.06On January 1, 20X3, Perkins Printing Corporation
purchased a digital press for $1,450,000. It cost an additional
$50,000 to deliver, install, and calibrate the press. This
machine has a service life of 5 years, at which time it is
expected that the device will be disposed of for a $100,000
salvage value.Perkins uses the straight-line depreciation
method.`(a)Prepare a schedule showing annual depreciation
expense, accumulated depreciation, and related calculations for
each year.(b)Show how the asset and related accumulated
depreciation would appear on a balance sheet at December 31,
20X5.(c)Prepare journal entries to record the asset's acquisition,
annual depreciation for each year, and the asset's eventual sale
for $100,000.
Worksheet B-10.06(a)YearAnnual ExpenseAccumulated
Depreciation at End of YearAnnual
Expense CalculationX3X4X5X6X7(b)Property, Plant &
Equipment (20X5)EquipmentLess: Accumulated
depreciation(c)GENERAL
JOURNALDateAccountsDebitCredit1-JanTo record the
purchase of press31-Dec20X3To record 20X3 depreciation31-
Dec20X4To record 20X4 depreciation31-Dec20X5To record
20X5 depreciation31-Dec20X6To record 20X6 depreciation31-
Dec20X7To record 20X7 depreciation31-Dec20X7To record
disposal of asset
B-10.06
B-10.07On January 1, 20X6, Outback Air purchased a new

5. engine for one of its airplanes used to transport adventurers to
remote regions of western Australia. The engine cost $750,000
and has a service life of 10,000 flight hours. Regulations
require careful records of usage, and the engines must be
replaced or rebuilt at the end of the 10,000 hour service period.
Outback simply chooses to sell its used engines and acquire new
ones. Used engines are expected to be resold for 1/3 of their
original cost.Outback uses the units-of-output depreciation
method.`(a)Assuming that the engine was used as follows,
prepare a schedule showing annual depreciation expense,
accumulated depreciation, and related calculations for each
year.
20X6 1,500 hours
20X7 4,000 hours
20X8 3,000 hours
20X9 1,500 hours(b)Show how the asset and related
accumulated depreciation would appear on a balance sheet at
December 31, 20X7.(c)Prepare journal entries to record the
asset's acquisition, annual depreciation for each year, and the
asset's eventual sale for $250,000.
B-10.07
Worksheet B-10.07(a)YearAnnual ExpenseAccumulated
Depreciation at End of YearAnnual
Expense CalculationX6X7X8X9(b)Property, Plant & Equipment
(20X7)Aircraft engineLess: Accumulated
depreciation(c)GENERAL
JOURNAL DateAccountsDebitCredit1-JanTo record the
purchase of engine31-Dec20X6To record 20X6 depreciation31-
Dec20X7To record 20X7depreciation31-Dec20X8To record
20X8 depreciation31-Dec20X9To record 20X9 depreciation31-
Dec20X9To record disposal of asset
B-10.07
B-10.08On January 1, 20X1, Pagoda Pond Construction
acquired a small excavator for $85,000. This device had a 4-
year service life to Pagoda, at which time it is expected that the

6. equipment will be sold for a $10,000 salvage value.Pagoda uses
the double-declining balance depreciation method.`(a)Prepare a
schedule showing annual depreciation expense, accumulated
depreciation, and related calculations for each year.(b)Show
how the asset and related accumulated depreciation would
appear on a balance sheet at December 31, 20X3.(c)Prepare
journal entries to record the asset's acquisition, annual
depreciation for each year, and the asset's eventual sale for
$10,000.
B-10.08
Worksheet B-10.08(a)YearAnnual ExpenseAccumulated
Depreciation at End of YearAnnual
Expense CalculationX1X2X3X4(b)Property, Plant & Equipment
(20X3)EquipmentLess: Accumulated depreciation(c)GENERAL
JOURNALDateAccountsDebitCredit1-JanTo record purchase of
excavator31-Dec20X1To record 20X1 depreciation31-
Dec20X2To record 20X2 depreciation31-Dec20X3To record
20X3 depreciation31-Dec20X4To record 20X4 depreciation31-
Dec20X4To record disposal of asset
B-10.08
B-10.09On January 1, 20X1, Floral Features purchased a
delivery truck for $65,000. At the time of purchase, Floral
Features anticipated that it would use the truck for 4 years, even
though its physical life is 8 years. At the end of the 4-year
period, Floral believes it will be able to sell the truck for
$35,000. Floral Features uses the straight-line depreciation
method.Gasoline prices increased significantly, and consumers
began to buy more efficient vehicles. By early 20X3, it became
apparent that the market for used delivery trucks like the one
belonging to Floral Features was virtually nonexistent.
Accordingly, Floral Features changed its plans and decided it
would use the truck for its full 8-year life. At the end of the
revised useful life, it is expected that the truck will be worth
$2,000 for scrap value.`Prepare a schedule showing annual
depreciation expense, accumulated depreciation, and related
calculations for each year.

7. B-10.09
Worksheet B-10.09YearAnnual ExpenseAccumulated
Depreciation at End of YearAnnual
Expense CalculationX1X2X3X4X5X6X7X8
B-10.09
I-10.03 On January 1, 20X2, The GenKota Winery purchased a
new bottling system. The system has an expected life of 5
years. The system cost $325,000. Shipping, installation, and
set up was an additional $35,000. At the end of the useful life,
Julie Hayes, chief accountant for GenKota, expects to dispose
of the bottling system for $96,000. She further anticipates total
output of 660,000 bottles over the useful life.(a)Assuming use
of the straight-line depreciation method, prepare a schedule
showing annual depreciation expense, accumulated
depreciation, and related calculations for each
year.(b)Assuming use of the units-of-output depreciation
method, prepare a schedule showing annual depreciation
expense, accumulated depreciation, and related calculations for
each year. Actual output, in bottles, was 100,000 (20X2),
130,000 (20X3), 150,000 (20X4), 160,000 (20X5), and 120,000
(20X6).(c)Assuming use of the double-declining balance
depreciation method, prepare a schedule showing annual
depreciation expense, accumulated depreciation, and related
calculations for each year.(d)Assuming use of the straight-line
method, prepare revised depreciation calculations if the useful
life estimate was revised at the beginning of 20X4, to anticipate
a remaining useful life of 4 additional years (in other words, a
total life of 6 years). The revised useful life was accompanied
by a change in estimated salvage value to $54,400.
I-10.03
Worksheet I-10.03 (a) Straight-lineYearAnnual
ExpenseAccumulated Depreciation at End of YearAnnual
Expense CalculationX2X3X4X5X6(b) Units of
OutputYearAnnual ExpenseAccumulated Depreciation at End
of YearAnnual Expense CalculationX2X3X4X5X6(c) Double-
declining balanceYearAnnual ExpenseAccumulated

8. Depreciation at End of YearAnnual Expense
CalculationX2X3X4X5X6(d) Straight-line revisedYearAnnual
ExpenseAccumulated Depreciation at End of YearAnnual
Expense CalculationX2X3X4X5X6X7
I-10.03
I-10.04Grant Price is conducting an audit of the property,
plant, and equipment records of Wellron Corporation. Grant
selected two specific assets for closer inspection. Grant has
examined documentation related to each asset's original
purchase and compared it to the recorded cost, physically
inspected the item to determine that it is still in the possession
of the company, and conducted other similar assurance
procedures.The final step in the audit of these accounts is to test
the calculations of depreciation expense and accumulated
depreciation. Grant has asked you to perform this final
procedure for 20X8. Below is a schedule of the two assets, with
the depreciation values determined by Wellron. The building
was depreciated by the straight-line method, and the truck by
the double-declining balance method. Determine if the
indicated depreciation values are correct.ItemCostPurchase
DateService LifeSalvage ValueDepreciation Expense for
20X8Accumulated Depreciation at 12/31/X8Building$
1,200,000July 1, 20X125 years$ 400,000$ 32,000$
256,000Truck$ 80,000Oct. 1, 20X68 years$ 5,000$ 13,184$
35,449
I-10.04
Worksheet I-10.04Building:Truck:
I-10.04
B-11.01 Scott Drilling Company owns an oil and gas drilling
rig. The company is continually spending money to repair,
maintain, refurbish, and upgrade this unit. Below is a listing of
various costs incurred. Indicate, by placing check marks in the
appropriate boxes, if each cost is a "capital" or "revenue"
expenditure. If a capital item, indicate whether the cost is more
likely considered to be a "replacement" or a

9. "betterment."CLASSIFICATION:FOR CAPITAL
ITEMS:CapitalRevenueReplacementBettermentRoutine cleaning
and repainting✓Replace of expensive cables and
pulleysAddition of directional drilling motorSafety inspection
feeRaising and lowering rig at each new drill siteInterest cost
on loan to buy rigInstallation of additional advanced lighting
system technologyTurntable, deck, and bearings in place of
similar worn out unitLubrication of all moving partsWelding
broken outrigger mountInstallation of anti-slip flooring on all
smooth surface walk ways
&R&"Myriad Web Pro,Bold"&20B-11.01
B-11.01
Worksheet B-11.01 CLASSIFICATION:FOR CAPITAL
ITEMS:CapitalRevenueReplacementBettermentRoutine cleaning
and repainting✓Replace of expensive cables and
pulleysAddition of directional drilling motorSafety inspection
feeRaising and lowering rig at each new drill siteInterest cost
on loan to buy rigInstallation of additional advanced lighting
system technologyTurntable, deck, and bearings in place of
similar worn out unitLubrication of all moving partsWelding
broken outrigger mountInstallation of anti-slip flooring on all
smooth surface walk ways
&L&"Myriad Web Pro,Bold"&12Name:
Date: Section: &R&"Myriad Web
Pro,Bold"&20B-11.01
B-11.01
B-11.02Robinson Corporation recently requested a contractor to
prepare a proposal to refurbish the exterior of its office
building. Robinson wanted to give its building a "face lift."
The contractor provided the following bid
document:ROBINSON CORPORATION BIDAdd extension to
front porch approach$ 20,000Install shrubs and
trees2,500Replace rotting exterior siding material7,500Replace
burned out exterior light bulbs500Total for all
work:$30,500Assume that Robinson Corporation agreed to the

10. bid, and authorized the work. What journal entry would be
appropriate for each of the above expenditures?
B-11.02
Worksheet B-11.02GENERAL
JOURNAL DateAccountsDebitCreditTo record addition to
existing buildingTo record addition of landscapingTo record
replacement of siding materialTo record replacement of light
bulbs
B-11.02
B-11.03Ng's Shrimp Company owns a fishing vessel that
originally cost $250,000, with a 20-year life, and no anticipated
salvage value. Ng uses the straight-line depreciation method.
Review the following three independent cases, and prepare the
journal entry to reflect the disposition of the boat in each
case.Case 1After 8 years of ownership, the boat was taken by a
storm.Case 2After 12 years of ownership, the boat was sold for
$175,000.Case 3After 15 years of ownership, the boat was sold
for $60,000.
B-11.03
Worksheet B-11.03GENERAL
JOURNAL DateAccountsDebitCreditCase 1Case 2Case 3
B-11.03
B-11.04 Wasson Farming Corporation owned many tractors.
The company has usually contracted with a trucking company to
haul the tractors to the tractor dealership for repairs. With the
aging of the tractors, the company is incurring substantial
hauling costs because of the increasing frequency of repairs.
The company is considering trading a tractor for a trailer,
thereby enabling it to haul tractors without having to hire a
trucking company. This exchange transaction would
significantly improve the company's cash flow and does have
"commercial substance."The trailer that will be acquired in the
exchange has a fair value of $35,000. Wasson owns two
tractors that are currently valued at $35,000. One of these two
tractors will be exchanged (and no boot will be involved). The
owner of Wasson Farming is deciding which tractor to give up,

11. and is interested in learning about the financial statement
impact of the exchange. Prepare alternative journal entries,
assuming an exchange of Tractor A versus Tractor B. Facts
about each tractor follow:Tractor ACost, $100,000; accumulated
depreciation $80,000Tractor BCost, $75,000; accumulated
depreciation $25,000
B-11.04
Worksheet B-11.04GENERAL
JOURNALDateAccountsDebitCreditTractor ATractor B
B-11.04
B-11.05 Leonard Heinz was recently put in charge of the
construction division of McMahan Industries. He has reviewed
the plant assets and their related accounting records, and
believes certain items are "impaired" and should be charged off
to a loss account. Examine the following list and decide if you
believe the item is impaired.Impaired?YesNoAn abandoned
building is slated for demolition✓Equipment that will continue
to be used as planned in the production of profitable projects;
however, a forced sale of the equipment would not recover its
book valueUsed equipment is no longer in use, but will be sold
for more than its book valueNewly purchased assets for which
the company significantly overpaid, and which have costs that
will not be recovered from future cash flowsActions of
competitors have forced McMahan to permanently lower prices,
and certain items of equipment continue to be used at full
capacity, even though the resulting production is unprofitable
and will not recover costThe maintenance department failed to
properly lubricate the bearings on a crane, and it is now
significantly damaged
B-11.05
Worksheet B-11.05Impaired?YesNoAn abandoned building is
slated for demolition✓Equipment that will continue to be used
as planned in the production of profitable projects; however, a
forced sale of the equipment would not recover its book
valueUsed equipment is no longer in use, but will be sold for
more than its book valueNewly purchased assets for which the

12. company significantly overpaid, and which have costs that will
not be recovered from future cash flowsActions of competitors
have forced McMahan to permanently lower prices, and certain
items of equipment continue to be used at full capacity, even
though the resulting production is unprofitable and will not
recover costThe maintenance department failed to properly
lubricate the bearings on a crane, and it is now significantly
damaged
B-11.05
B-11.06 McCurdy Oil acquired an existing oil well and all
related equipment used in the production of oil. McCurdy paid
$2,500,000, of which 20% was attributable to pumps, pipelines,
and tanks. The oil well is expected to produce oil as
follows:Year 1100 barrels per dayYear 280 barrels per dayYear
360 barrels per dayYear 440 barrels per dayYear 520 barrels per
dayAt the end of the 5th year, McCurdy anticipates selling the
oil well and equipment for $1,000,000. Of this amount,
$250,000 is expected to be attributable to the
equipment.Assuming the preceding estimates serve as the basis
for depletion, calculate depletion cost for the 3rd year. Prepare
an approriate journal entry for depletion. In preparing the
entry, assume that all oil is sold at the time of its production
(i.e., none of the oil remains in inventory).
B-11.06
Worksheet B-11.06GENERAL
JOURNALDateAccountsDebitCreditYear 3To record depletion
of oil well
B-11.06
B-11.07The general journal of Kevin Berry Industries included
the following entries relating to various expenditures during
20X5. Review this information and prepare corresponding
entries to record any necessary straight-line amortization or
other impairment for the year ending December 31.GENERAL
JOURNALDateAccountsDebitCredit1-
JanPatent30,000Cash30,000Acquired a patent from an inventor.
The patent has a 15-year remaining legal life, but it is expected

13. that Berry will utilize the patent for only 5 years.15-
MayResearch Expense12,000Cash12,000Incurred costs in
research and development activity. It is possible these costs
will result in new product with a 48-month life.1-
SepInventory25,000Building75,000Goodwill50,000Cash150,000
To record purchase of business, expected to be operated
successfully for an indefinite number of future years.20-
DecCopyright10,000Cash10,000Purchased copyright to a video
production, but concluded that it was worthless by year's end.
B-11.07
Worksheet B-11.07GENERAL
JOURNAL DateAccountsDebitCredit
B-11.07
I-11.01 Tidwell Corporation's accounting staff was unsure of
how to account for certain expenditures relating to its property,
plant, and equipment. As a result, the company has delayed
recording entries related to the following transactions. In
addition, until these items are resolved, the determination of
depreciation expense for the year has been delayed.Item AThe
company's delivery truck, originally costing $90,000 and having
a 6-year life with no salvage value, was substantially
overhauled at a cost of $10,000. This expenditure occurred at
the beginning of the year, when the truck was two years old.
This action restored the truck to "like-new" condition, and
extended the useful life by an additional three years.Item BAt
mid-year, the company added a new $65,000 dust handling unit
to the heating and ventilation system in its inventory
warehouse. This new feature is supposed to reduce dust from
the air and provide for a cleaner environment in which to store
inventory. The new dust unit has a 10-year physical life, but it
is anticipated that it will be scraped six and one-half years after
its installation, when the primary heating system is replaced.
As of the beginning of the year, the heating and ventilation
system had a cost of $240,000 and accumulated depreciation of
$100,000.Item CThe company entered into a 5-year contract
with Reliable Maintenance Services Company. The agreement

14. provides for Tidwell to make monthly payments of $1,500 for
all routine cleaning and maintenance activities on shop
equipment. Two months of services had been provided and paid
as of the end of the year. As of the beginning of the year, shop
equipment had a remaining net book value of $300,000, and a
remaining life of three years.Item DTidwell entered into a joint
agreement with several other companies to mutually acquire an
easement on an adjoining tract of land. The easement was
needed to provide right-of-way for a future rail transport line
extension that will benefit all of the participating companies.
Tidwell paid $10,000 for its share of the access easement. The
easement is perpetual in nature.Prepare journal entries for each
of the four described expenditures. Then, calculate
depreciation, as appropriate, for the expenditure and/or related
assets. Assume straight-line depreciation in each case.
I-11.01
Worksheet I-11.01 GENERAL
JOURNAL DateAccountsDebitCreditItem A
I-11.01
I-11.02Pierce Corporation recently hired a new manager for its
struggling construction division. The manager was given
responsibility for streamlining operations and restoring
profitability. Selling selected assets is one option under
consideration.
Begin by reviewing the following asset listing, and prepare
hypothetical entries "as if" each asset were sold for cash at its
estimated fair value. Then, determine which asset should be
sold if the objective becomes to (a) have the largest immediate
accounting gain, (b) have the largest immediate accounting loss,
(c) result in the highest avoidance of future depreciation
expense in periods subsequent to the period of asset sale, (d)
produce the most immediate cash inflow, (e) have the largest
total asset position, or (f) have no change in total
assets.CostAccumulated DepreciationFair ValueAsset A$
2,500,000$ 1,000,000$ 3,000,000Asset

15. B800,000100,000700,000Asset
C4,600,000500,0004,000,000Asset
D3,250,0001,250,0001,250,000
I-11.02
Worksheet I-11.02GENERAL
JOURNAL DateAccountsDebitCreditTo record sale of Asset
ATo record sale of Asset BTo record sale of Asset CTo record
sale of Asset D(a)Largest gain(b)Largest loss(c)Highest
depreciation to avoid(d)Largest immediate cash flow(e)Largest
addition to total assets(f)No change in assets
I-11.02