Exercise #1On March 1, 2014, Rich Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An oldwarehouse on the property was razed at a cost of $9,400; the salvaged materials were sold for $1,700. Additional expenditures before construction beganincluded $1,100 attorney's fee for work concerning the land purchase, $5,000 real estate broker's fee, $7,800 architect's fee, and $12,700 to put in driveways anda parking lot.Instructions(a)Determine the amount to be reported as the cost of the land.Cash$ 80,000.00Razed Warehouse9,400.00Less: Sale of salvaged Materials(1,700.00)Expenditures before start of constructionAttorney's fee1,100.00Broker's fee5,000.00TotalCost of Land(b)93,800.00-For each cost not used in part (a), indicate the account to be debited.Type of FeeAmountAccount to be debitedArchitect's fee7,800 BuildingDriveways and parking lot12,700 Land improvementsExercise #2Xi Company purchased a new machine on October 1, 2014, at a cost of $96,000. The company estimated that the machine will have a salvage value of$12,000. The machine is expected to be used for 10,000 working hours during its 5-year life.InstructionsCompute the depreciation expense under the following methods for the year indicated.(a)Straight-line for 2014.Straight line: Asset cost Est. Salvage Value/ Number of accounting periods for estimated useful life.Asset Cost96,000Salvage Value1 ...
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