Accounting II Week 2 Exercises and Problems
Exercises and Problems
XACC/291 Principles of Accounting II
Week 2
February 8, 2015
Exercise E9-1
The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011 (determine cost of the plant acquisitions).
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions:
(a) Explain the application of the cost principle in determining the acquisition cost of plant assets.
Plant assets are long-lived assets acquired for use in the business and not for the resale to the customers. The matching principle of accounting requires that we include in the plant and equipment accounts those costs that will provide services over a period of years. During these years, the use of the plant assets contributes to the earning of revenues. The cost of a plant asset includes all expenditures reasonable and necessary in acquiring the asset and placing it in a position and condition for use in the operations of the business.
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited.
1. Land-Debit Credit-Cash
2. Equipment-Debit Credit-Cash
3. Equipment –Debit Credit-Cash
4. Land improvements-Debit Credit-Cash
5. Equipment-Debit Credit-Cash
6. Equipment-Debit Credit-Cash
7. Equipment-Debit Credit-Cash
8. Equipment-Debit Credit-Cash
Exercise E9-7
Brainiac Company purchased a delivery truck
XACC/291 Principles of Accounting II
Week 2
February 8, 2015
Exercise E9-1
The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011 (determine cost of the plant acquisitions).
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions:
(a) Explain the application of the cost principle in determining the acquisition cost of plant assets.
Plant assets are long-lived assets acquired for use in the business and not for the resale to the customers. The matching principle of accounting requires that we include in the plant and equipment accounts those costs that will provide services over a period of years. During these years, the use of the plant assets contributes to the earning of revenues. The cost of a plant asset includes all expenditures reasonable and necessary in acquiring the asset and placing it in a position and condition for use in the operations of the business.
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited.
1. Land-Debit Credit-Cash
2. Equipment-Debit Credit-Cash
3. Equipment –Debit Credit-Cash
4. Land improvements-Debit Credit-Cash
5. Equipment-Debit Credit-Cash
6. Equipment-Debit Credit-Cash
7. Equipment-Debit Credit-Cash
8. Equipment-Debit Credit-Cash
Exercise E9-7
Brainiac Company purchased a delivery truck