In: Accounting
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Stillwater Manufacturing, Inc. was formed on January 1 by issuing 100,000 shares of $1 par value stock for $250,000.
On that same date, Stillwater Manufacturing, Inc. acquired a piece of machinery and a truck as part of one purchase for $200,000 cash. The machine had a list price of $161,000 and the truck had a list price of $69,000.
Freight cost amount to $1,300 for the machinery only. There was no delivery charge associated with the truck. The company had to hire a specialist to calibrate the machine. The specialist’s fee was $900.
The machine operator is paid an annual salary of $50,000. The employee that will drive the truck is paid an annual salary of $75,000. The cost of the company’s theft insurance policy increased by $600 per year as a result of acquiring the machine.
The machine has a 10-year useful life and an expected salvage value of $15,000.
The truck has a 5-year useful life and an expected salvage value of $19,000.
Record the above transactions related to the (1) issuance of common stock, (2) purchase of the machine and truck (include all costs that should be capitalized), (3) depreciation on the machine for the first full year of operation, and (4) depreciation on the truck for the first full year of operation.
Balance Sheet |
Income Statement |
Cash Flow |
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Assets |
Equity |
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Cash |
Mach. |
Truck |
A. Depr |
C. Stock |
PIC in Excess |
R. Earn. |
Rev. |
Exp. |
Net Inc. |
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1 |
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2 |
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3 |
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4 |
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Bal |
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What is the net amount of property, plant, and equipment that will appear on Stillwater Manufacturing’s balance sheet at the end of this year?
$______________________
Solution:
Calculation of Net Amount of Property, Plant & Equipment shown in Balance Sheet
Workings:
1) Calculation of Cost of Machine
Cost of Machine = Purchase price + Freight Cost + Specialist Fees
Cost of Machine = $140,000 + $1,300 + $900
Cost of Machine = $142,200
2) Calculation of Puchase Price of both Assets