Fluffier Company incurred the following costs.
Chapter Ten Maria Fonseca Challenge Exercise 10-1 Expands on: E10-2 LO: 1 Fluffier Company incurred the following costs.
1. Sales tax on factory machinery purchased, $7,000.
2. Painting of and lettering on truck immediately upon purchase, $800
3. Installation and testing of factory machinery, $2,500.
4. Real estate broker’s commission on land purchased $4,500.
5. Insurance premium paid for first year’s insurance on new truck $930.
6. Cost of landscaping on property purchased $9,200
7. Cost of paving parking lot for new building, $18,700.
8. Cost of clearing, draining, and filling land, $14,400.
9. Architect’s fees on self-constructed building, $11,000.
Instructions:
a) Indicate to which account Trudy would debit each of the costs.
b) Explain why item 1 is not debited to an expense account.
c) Explain why items 7 and 8 are debited to different accounts.
Fluffier company creadit
Debit
$18700 cost paving new $18,700
$2,500 testing factory machinery
$ 930 $7,000 sale tax machinery purchase
$800painting and lethe.
$14,400 cost clearing draining and filling land
$4,500 c land purch
$9,200 landscaping property perched
total amount
Challenge Exercise 10-2 Expands on: E10-11 LO:
3 Grace Company owns equipment that cost $70,000 when purchased on January 1, 2017. It has been depreciated using the straight-line method based on estimated salvage value of $7,000 and an estimated useful life of 5 years.
Instructions:
Prepare Grace Company’s journal entries to record the sale of the equipment in these four independent situations. Update depreciation on assets disposed of at time of sale.
(a) Sold for $40,000 on January 1, 2017.
(b) Sold for $40,000 on April 1, 2017.
(c) Sold for $15,000 on January 1, 2017
. (d) Sold for $15,000 on September 1, 2017.
(e) Repeat (a), assuming Grace Uses double-declining balance depreciation. (e) Repeat (c), assuming Grace uses double-declining balance depreciation.
Grace Company Journal
Date January 1, 2017
Account /explanations Debit credit
Supplies $ 70,000 $70,000 $70,000
Sold $ 40,000
April 1, 1 2017 sold $ 40, 00 0 $40,000
January 1, 2017 sold $15,000
September 1, 2017 sold $ 15,000
