Chapter 9 Fixed Assets and Intangible Assets 423Cristy Fleming owns and operates Quesenberry Print Co. During February, Quesenberry 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 the new printing press include the following:- Freight
- Special foundation
- Sales tax on purchase price
- Insurance while in transit
- Fee paid to factory representative for installation
- New parts to replace those damaged in unloading
Costs related to the secondhand printing press include the following: - Repair of vandalism during installation
- Replacement of worn-out parts
- Freight
- Installation
- Repair of damage incurred in reconditioning the press
- Fees paid to attorney to review purchase agreement
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 secondhand printing press should be deb-
ited to the asset account.
A company 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 clear-
ing, 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?Alligator Delivery Company acquired an adjacent lot to construct a new warehouse, paying
$35,000 and giving a short-term note for $125,000. Legal fees paid were $1,100, delinquent taxes
assumed were $12,500, and fees paid to remove an old building from the land were $18,000.
Materials salvaged from the demolition of the building were sold for $3,600. A contractor was
paid $512,500 to construct a new warehouse. Determine the cost of the land to be reported on
the balance sheet.Ball-Peen Metal Casting Co. reported $859,600 for equipment and $317,500 for accumulated
depreciation—equipment on its balance sheet. Does this mean (a) that the replacement cost of
the equipment is $859,600 and (b) that $317,500 is set aside in a special fund for the replacement
of the equipment? Explain.- In what sections of the income statement are gains and
losses from the disposal of fixed assets presented? - a.Over what period of time should the cost of a patent
acquired by purchase be amortized?
b.In general, what is the required treatment for research
and development costs?
c. How should goodwill be amortized?- How would you evaluate the effective use of fixed assets?
EXERCISES
Exercise 9-1
Costs of acquiring fixed assets
Goal 1
Exercise 9-2
Determine cost of land
Goal 1
Exercise 9-3
Determine cost of land
Goal 1
$188,000
Exercise 9-4
Nature of depreciation
Goal 1