Financial Accounting Questions and Answers

Alpine Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts. (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes be debited to the land account? (b) If such costs are debited to Land, should they be depreciated? Answer: a. Yes. All expenditures incurred for the purpose of making the land suitable for its intended use should be debited to the land account. b. No. Land is not depreciated.

Discount Delivery Company acquired an adjacent lot to construct a new warehouse, paying $25,000 and giving a short-term note for $300,000. Legal fees paid were $2,100, delinquent taxes assumed were $14,000, and fees paid to remove an old building from the land were $9,000. Materials salvaged from the demolition of the building were sold for $3,500. A contractor was paid $800,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet. Answer: Initial cost of land ($25,000 + $300,000) ........................................  $325,000 Plus: Legal fees....................................................$ 2,100         Delinquent taxes.............................................. 14,000         Demolition of building........................................ 9,000            25,100      $350,100 Less salvage of materials..................................

Emerald Lines Co. incurred the following costs related to trucks and vans used in operating its delivery service: 1. Installed security systems on four of the newer trucks. 2. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty. 3. Installed a hydraulic lift to a van. 4. Replaced a truck’s suspension system with a new suspension system that allows for the delivery of heavier loads. 5. Removed a two-way radio from one of the trucks and installed a new radio with a greater range of communication. 6. Repaired a flat tire on one of the vans. 7. Changed the radiator fluid on a truck that had been in service for the past four years. 8. Tinted the back and side windows of one of the vans to discourage theft of  contents. 9. Changed the oil and greased the joints of all the trucks and vans. 10. Overhauled the engine on one of the trucks purchased three years ago. Classify each of the costs as a capital expenditure or a revenue...

Les Bancroft owns and operates Crown Print Co. During January, Crown Print Co. incurred the following costs in acquiring two printing presses. One printing press was new, and the other was used by a business that recently filed for bankruptcy. Costs related to new printing press: 1. Sales tax on purchase price 2. Insurance while in transit 3. Freight 4. Special foundation 5. Fee paid to factory representative for installation 6. New parts to replace those damaged in unloading Costs related to used printing press: 7. Fees paid to attorney to review purchase agreement 8. Freight 9. Installation 10. Replacement of worn-out parts 11. Repair of damage incurred in reconditioning the press 12. Repair of vandalism during installation a. Indicate which costs incurred in acquiring the new printing press should be debited to the asset account. b. Indicate which costs incurred in acquiring the used printing press should be debited to the asset account. Answer: a. New printing press: 1, 2, 3, 4, ...

Financial statement data for years ending December 31 for Fallon Company are shown below.                                                                                        2012               2011 Net sales                                                                   $740,000         $520,000 Fixed assets: Beginning of year                                                      425,000         ...

Financial statement data for years ending December 31 for Winnett Company are shown below.                                                                                  2012      2011 Net sales                                                             $3,572,000 $3,526,000 Fixed assets: Beginning of year                                                 900,000   820,000 End of year                                 ...

On December 31, it was estimated that goodwill of $1,200,000 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for $288,000 on April 1. a. Journalize the adjusting entry on December 31 for the impaired goodwill. b. Journalize the adjusting entry on December 31 for the amortization of the patent rights. Answer: a.  Dec.  31  Loss from Impaired Goodwill...................... 1,200,000                                            Goodwill ..................................................  1,200,000                                                        Impaired goodwill. b. Dec. 31 Amortization Expense—Patents................. 18,000             ...