Identify which of the following expenditures is considered as a capital expenditure that must be depreciated (capitalized)

Complete the following problems. You must show your work on the math problems to get full credit. Every student is responsible for completing their own responses to the following problems.

 

1. Identify which of the following expenditures is considered as a capital expenditure that must be depreciated (capitalized):

 

a)   Purchased land to build a new facility for $400,000.

b)   Installed a water dispenser in a company dining area for $3250.

c)   Purchased a spare part for a framing machine for $5,000.

d)   Purchased a patent on an energy-saving device over six years at a cost of $42,000.

e)   Purchased a fax machine for $8,000.

f)    Paid $18,000 to lease a dump truck for eight months.

g)    Painted the warehouse building, both interior and exterior, for $16,500.

h)   Repaved a parking lot for $15,000.

i)   Installed a conveyor belt system to automate some part of a production processes for $25,000.

j)   Purchased a new computer system for $5,000.

 

2. Consider the following data on an asset:

 

Cost of the asset, I:     $35,000

Useful life, N:               6 years

Salvage value, S:        $3,000

 

Compute the annual depreciation allowances and the resulting book values, using the straight-line depreciation method.

 

3. Consider the following data on an asset:

 

Cost of the asset, I:     $40,000

Useful life, N:               8 years

Salvage value, S:        $4,500

 

Compute the annual depreciation allowances and the resulting book values, using the double-declining-balance method.

 

4.  A company’s accounting record shows the following:

Truck A                         Truck B

Purchase Cost:                                 $22,500                        $45,000

Salvage Value:                                  $2,000                          $4,500

Useful Life (miles):                           150,000                         200,000

Miles Driven During Year:                 13,000                           24,000