homework accounting

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.

Classify each of the costs as a capital expenditure or a revenue expenditure.

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?