1. Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $189,000 wi
ID: 2450782 • Letter: 1
Question
1.
Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $189,000 with terms of 4/15, n/45. Payment was made within the discount period. Shipping costs were $4,500, which included $200 for insurance in transit. Installation costs totaled $11,200, which included $3,500 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the 10-ton draw press is:
a) $193,640
b) $198,640
c) $181,440
d) $197,140
10.
The average accumulated expenditures for 2017 by the end of the construction period was:
a) $2,042,000
b) $1,624,000
c) $1,019,250
d) $1,312,000
20. Broadway Ltd. purchased equipment on January 1, 2014, for $840,000, estimating a 7-year useful life and no residual value. In 2014 and 2015, Broadway depreciated the asset using the straight-line method. In 2016, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2016 on this equipment? (Do not round your depreciation rate.)
a) $100,000
b) $120,000
c) $240,000
d) $200,000
Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $189,000 with terms of 4/15, n/45. Payment was made within the discount period. Shipping costs were $4,500, which included $200 for insurance in transit. Installation costs totaled $11,200, which included $3,500 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the 10-ton draw press is:
a) $193,640
b) $198,640
c) $181,440
d) $197,140
10.
On January 1, 2016, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2017. Expenditures on the project were as follows:January 1, 2016 $319,000 September 1, 2016 $468,000 December 31, 2016 $468,000 March 31, 2017 $468,000 September 30, 2017 $319,000
Dreamworld had $5,600,000 in 12% bonds outstanding through both years.
The average accumulated expenditures for 2017 by the end of the construction period was:
a) $2,042,000
b) $1,624,000
c) $1,019,250
d) $1,312,000
20. Broadway Ltd. purchased equipment on January 1, 2014, for $840,000, estimating a 7-year useful life and no residual value. In 2014 and 2015, Broadway depreciated the asset using the straight-line method. In 2016, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2016 on this equipment? (Do not round your depreciation rate.)
a) $100,000
b) $120,000
c) $240,000
d) $200,000
Explanation / Answer
1)
Capitalized cost of the 10-ton draw press = Purchase Cost*(1-discount rate) + Shipping cost including insurance in transit + Installation Cost including site mainetnance
Capitalized cost of the 10-ton draw press = 189000*(1-4%) + 4500 + 11200
Capitalized cost of the 10-ton draw press = $ 197140
Answer
d) $197,140
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