E7-3, E7-4, and E7-8

Exercise 8

E7-3

Determine cost of land

Obj|1

✓ $715,725

Express Delivery Company acquired an adjacent lot to construct a new warehouse, paying $80,000 and giving a short-term note for $620,000. Legal fees paid were $1,900, delinquent taxes assumed were $9,000, and fees paid to remove an old building from the land were $6,000. Materials salvaged from the demolition of the building were sold for $1,175. A contractor was paid $800,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.

E7-4

Capital and revenue expenditures

Obj|1

Hometown Delivery Co. incurred the following costs related to trucks and vans used in operating its delivery service:

• 1.Changed the oil and greased the joints of all the trucks and vans.

• 2.Changed the radiator fluid on a truck that had been in service for the past four years.

• 3.Installed a hydraulic lift to a van.

• 4.Installed security systems on four of the newer trucks.

• 5.Overhauled the engine on one of the trucks purchased three years ago.

• 6.Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty.

• 7.Removed a two-way radio from one of the trucks and installed a new radio with a greater range of communication.

• 8.Repaired a flat tire on one of the vans.

• 9.Replaced a truck's suspension system with a new suspension system that allows for the delivery of heavier loads.

• 10.Tinted the back and side windows of one of the vans to discourage theft of contents.

    

   

  E7-8

  Straight-line depreciation

  Obj|2

  ✓ $3,170

  A refrigerator used by a meat processor has a cost of $86,750, an estimated residual value of $7,500, and an estimated useful life of 25 years. What is the amount of the annual depreciation computed by the straight-line method?