Question

Crown Construction had several Plant Asset transactions during the year. Use the facts provided to answer the following questions.  

Question 1:

Crown purchased a new dump truck for $38,000 cash on January 1, 20Y3. In addition to the purchase price, Crown paid $700 for delivery charges and $3,800 in sales taxes. It also spent $1,000 in September for the dump truck's first oil change and some belt replacements. The dump truck has an estimated useful life of 10 years and a salvage value of $4,000. Crown estimates it will operate the dump truck for 10,400 hours during its useful life. Crown used the dump truck 980 hours during 20Y3.

How much depreciation expense will Crown record in 20Y3 using each of the depreciation methods listed below? Round your final answers to the nearest whole dollar. Include appropriate commas and no dollar signs (e.g. 1,000).

Straight-Line

Double-Declining Balance

Units of Activity

Question 2:

Crown acquired some land for the purpose of building a new storage facility for its large equipment. The following costs related to these plant assets were incurred in in 20Y3:

Land purchase price - $150,000

Real estate broker’s commission on the sale of the land - $4,000

Land title transfer fees - $500

Cost to remove an old building that existed on the land - $8,000

Construction costs related to the new building - $330,000

Installation of a sprinkler system around the new building - $5,000

Installation of a parking lot in front of the new building - $10,000

What value should Crown record for the land and the new building? Include appropriate commas and no dollar signs (e.g. 1,000).

Land

Building

Question 3:

Crown sold one of its machines for $3,000 on August 1, 20Y3. The machine originally cost Crown $12,000 and had accumulated depreciation of $10,200 at the time of sale. How much gain or loss would Crown record related to the sale of the machine? Indicate gain or loss in your answer and include appropriate commas and no dollar signs (e.g. 1,000 gain or 1,000 loss).

Answer 1

1)
Straight-Line =
Cost of Truck =  $38,000 + 700 + 3800	42,500.00
Salvage Value	4,000.00
Useful life	10
Depreciation Exp. = (42500 - 4000)/10	3,850.00
Double-Declining Balance
Depreciation Exp. = $42,500 x 1/10 x 2	8,500.00
Units of Activity
Depreciation Expenses = (42500 - 4000)/10400 hours x 980 hours	3,627.88
2)
Land:
Land purchase price -	150,000.00
Real estate broker’s commission on the sale of the land -	4,000.00
Land title transfer fees -	500.00
Cost to remove an old building that existed on the land -	8,000.00
Cost of Land	162,500.00
Building:
Construction costs related to the new building -	330,000.00
Installation of a parking lot in front of the new building -	10,000.00
Cost of Building	340,000.00
Installation of a sprinkler system around the new building - $5,000 (It will be recorded under other improvement catagory)
3)
Cost of Machine	12,000.00
Less: Accumulated Depreciation	10,200.00
Book Value	1,800.00
Less: selling Cost	3,000.00
Gain on sale of land	1,200.00