Chapter 10: 23Q (page 532)
What are the general rules for how gains or losses on retirement of plant assets should be reported in income?
Gain or loss on retirement of plant assets shown in income statement along with gain or loss from normal items.
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Question: What are the major characteristics of plant assets?
(Purchase of Computer with Zero-Interest-Bearing Debt) Cardinals Corporation purchased a computer on December 31, 2016, for \(105,000, paying \)30,000 down and agreeing to pay the balance in five equal installments of $15,000 payable each December 31 beginning in 2017. An assumed interest rate of 10% is implicit in the purchase price.
Instructions
(Round to two decimal places.)
(Analysis of Subsequent Expenditures) King Donovan Resources Group has been in its plant facility for 15 years. Although the plant is quite functional, numerous repair costs are incurred to maintain it in sound working order. The company’s plant asset book value is currently \(800,000, as indicated below.
Original cost | \)1,200,000 |
Accumulated depreciation | 400,000 |
Book value | \( 800,000 |
The following expenditures were made to the plant facility during the current year.
Instructions
Indicate how each of these transactions would be recorded in the accounting records.
Question: Indicate where the following items would be shown on a balance sheet. (a) A lien that was attached to the land when purchased. (b) Landscaping costs. (c) Attorney’s fees and recording fees related to purchasing land. (d) Variable overhead related to construction of machinery. (e) A parking lot servicing employees in the building. (f) Cost of temporary building for workers during construction of building. (g) Interest expense on bonds payable incurred during construction of a building. (h) Assessments for sidewalks that are maintained by the city. (i) The cost of demolishing an old building that was on the land when purchased.
Slaton Corporation traded a used truck for a new truck. The used truck cost \(20,000 and has accumulated depreciation of \)17,000. The new truck is worth \(35,000. Slaton also made a cash payment of \)33,000. Prepare Slaton’s entry to record the exchange. (The exchange has commercial substance.)
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