Chapter 7 Fixed assets have the following characteristics

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subject Authors Carl S. Warren

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CHAPTER 7
FIXED ASSETS, NATURAL RESOURCES,
AND INTANGIBLE ASSETS
CLASS DISCUSSION QUESTIONS
1. Fixed assets have the following characteris-
tics:
3. Real estate acquired as speculation should
5. Ordinarily not; if the book values closely
expense does not require an equivalent
decreasing the asset’s accumulated depre-
ciation account. Revenue expenditures are
12. a. An accelerated depreciation method is
reduces income tax payable to the IRS in
the earlier periods of an asset’s life.
b. The cost and accumulated depreciation
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EXERCISES
E71
E72
E73
Initial cost of land ($200,000 + $375,000) .................. $575,000
E74
E75
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E76
E77
First Year Second Year
E78
E79
E710
E711
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E712
a.
Year 2 Year 1
Vehicles ............................................... $ 7,542 $ 6,762
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E713
a.
Cost of equipment .................................................................... $ 560,000
b. 1. Update Depreciation
Balance Sheet
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Acc. Depr.
Retained
Statement
Equipment
=
Earnings
*$26,000 × 6/12
2. Sale of Equipment
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Acc.
Statement
Depr.
Retained
Cash
+
Equip.
Equip.
=
Earnings
E714
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E714, Concluded
c.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Acc.
Statement
Depr.
Retained
Cash
+
Equip.
Equip.
=
Earnings
d.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Acc.
Statement
Depr.
Retained
Cash
+
Equip.
Equip.
=
Earnings
Jan. 7.
192,400
(280,000)
93,750
6,150
Jan. 7.
E715
b.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Acc.
Retained
Statement
Depletion
=
Earnings
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E716
b.
Balance Sheet
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Retained
Statement
Patents
=
Earnings
E717
b.
Balance Sheet
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Retained
Statement
Goodwill
=
Earnings

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