b.
PROBLEM 9.2
A
SWANSON & HILLER, INC. (concluded)
Swanson & Hiller will probably use the straight-line method for financial reporting
12,000$
PROBLEM 9.3
A
50 Minutes, Strong
a. Costs to be depreciated include:
Cost of shelving
HILLS HARDWAR
E
b.
To record sale of shelving for $1,100 cash.
2. Journal entry assuming that the shelving was sold for $175:
175
To record sale of shelving for $175 cash.
PROBLEM 9.3
A
HILLS HARDWARE (concluded
)
Hills Hardware may use the straight-line method in its financial statements to
achieve the least amount of depreciation expense in the early years of the shelving’s
Cash
25 Minutes, Medium
Feb 10 Loss on Dis
p
osal of Plant Assets 2,200
Accumulated De
p
reciation: Office E
q
ui
p
ment 21,800
Office E
q
ui
p
ment 24,000
Scrapped office equipment; received no salvage value.
Sold land and building for a $100,000 cash down-
payment and a 5-year, 9% note for the balance.
To record trade-in of old truck on new; trade-in
allowance exceeded book value by $2,000.
q
p
computer, paying part cash, and issuing a 1-year,
8% note payable. Recognized loss equal to book value of
old computer ($4,000) minus trade-in allowance ($500).
b.
Gains and losses on asset disposals do not affect gross profit because they are not part of
the cost of goods sold. Such gains and losses do, however, affect net income reported in a
firm’s income statement.
PROBLEM 9.4
A
a.
General Journal
HITCHCOCK DEVELOPERS
25 Minutes, Medium
a.
PROBLEM 9.5
A
REDDICK CORPORATION
Operating expense. Although the training of employees probably has some benefit
extending beyond the current period, the number of periods benefited is highly uncertain.
20 Minutes, Medium
220,000$
PROBLEM 9.6
A
KIVI SERVICE STATIONS
a. Estimated goodwill associated with the purchase of Joe’s Garage:
Actual average net income per year
30 Minutes, Medium
a.
PROBLEM 9.7
A
THAXTON, INC.
Depreciation expense for the first two years under the three depreciation methods is
determined as follows:
30 Minutes, Medium
a.
$275,000
75,000
$350,000
PROBLEM 9.8
A
ROTHCHILD, INC.
Depreciation is calculated on the following amount:
Purchase price
Plus: Expenditures to prepare asset for use
Depreciation expense for Year 1:
The declining balance rate at 150% of the straight-line is:
100%/10 years = 10%; 10% x 1.5 = 15%
a.
(2)
(3)
SOLUTIONS TO PROBLEMS SET B
PROBLEM 9.1B
SMITHFIELD HOTEL
Freight charges are part of the cost of getting the equipment to a usable location and,
therefore, are part of the cost of the equipment.
25 Minutes, Easy
The cost of plant and equipment includes all expenditures that are reasonable and necessary
Sales tax is a reasonable and necessary expenditure in the purchase of plant assets and
should be included in the cost of the equipment.
c.
PROBLEM 9.1B
SMITHFIELD HOTEL (concluded)
Expenditures that should be debited to the