8. Fences and parking lots are reported on the balance sheet as a. current asset

Question

8. Fences and parking lots are reported on the balance sheet as a. current assets. b. land improvements. c. land D. property and equipment. 9. A company pays $100,000 for the rights to a well with 10 million gallons of water. It the company extracts 250,000 galions of water in the first year, what is the total depletion in year 1? a.$2,500 b.$1.000 c.$1,250 d.$10,000 10. JME acquired a depreciable asset on January 1, 2011, for $40,000 cash. At that time JME estimated the asset would last 10 years and have no salvage value. During 2013, JME estimated the remaining life of the asset to be only four more years with zero salvage value. If JME uses straight-line depreciation, What is the depreciation for 2013? a.$6,000 b.$12,000 c.$8,000 d.$11,250 Tyson Chandler Company purchased equipment for $135,000. The shi3pping cost was $5,000. Tyson spent an additional $15,000 testing and preparing the equipment for use. What amount should Tyson record as the cost of the equipment? 11. A.$135,000 b.$155,000 c.$145,000 D.$125,000

Explanation / Answer

1) Fences and parking lots are reported on the balace sheet as Ans. Land improvements. Ans 2. Depletion In year 1 Amount paid X No of gallons extracted/ Rights for total no. of gallons $100,000 X 2,50,000/ 10,000,000 $2,500 Ans 3. Total cost of asset $40,000 Useful life 10 Years Depreciation per year (uses straight line) Total cost - Salvage Value / Useful life of assets $40,000 -0 /10 $4,000 During, 2013 the remaining life of assests to be only four more years with no salvage value Depreciation for 2013 Total cost -Accumulated Depreciation - Salvage Value / Remaining life of assets $40,000-($4000 X2)- 0 /4 $40,000-$8000 / 4 $8,000 Ans 4. Calculation of the total cost of equipment : Particulars Amt. ($) Purchase price                                135,000 Add: Shipping cost                                     5,000 Testing and preparing the equipment for use                                  15,000 Total cost                                155,000

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