Question

On August 1, Daisy’s Groomers purchased new grooming equipment for $48,000 plus 8% sales tax. The equipment was advertised for $52,000. Other costs associated with the grooming equipment were: training for use of new equipment, $800; delivery cost of $225; installation cost, $1,100; and hiring of a new groomer, $1,000/month. At what amount will the grooming equipment be recorded on a balance sheet?

• $ 53,965

• $ 53,165

• $ 54,085

• $ 55,085

• XYZ, Inc. purchased an office building on October 1, 2020, that was put on the books at $800,000.  The building is expected to be used for 35 years and at the end of the 35 years will be sold for an estimated selling price of $100,000.  XYZ closes its books at the end of every calendar year.  XYZ, Inc. uses the straight-line method of depreciation.  Based on this information, which of the following is correct?

• Depreciation Expense at 12/31/20 is $20,000.

• Accumulated Depreciation at 12/31/20 is $20,000

• Depreciation Expense at 12/31/2021 is $5,000

• Accumulated Depreciation at 12/31/21 is $25,000

• At the end of the accounting period, the general ledger of Zack’s Skateboards had the following balances: Common Stock, $45,000; additional paid-in capital, $81,000; retained earnings, $336,000; and treasury stock, $18,000. What is the total amount of stockholders' equity?

• $126,000

• $336,000

• $462,000

• $444,000

Answer 1

1.

Daisy purchased equiment for $48000 and sales tax is addition is 8% which will be added to the cost .

For capitalisation of Assets the cost incurred for the delivery and installation are capitalised.

However training cost are not included in the capitalisation of assets as this are not incurred for the asset for making it use and this are not adding the value for the assets.

Thus the total assets value = Purchase cost + sales tax + Delivery cost + Installation cost

Equipment cost = 48000+ (48000*8%) + 225 +1100.

Equiment cost = 48000 +3840 + 225+ 1100

Equipment cost to be capitalised = $53165.

The correct option is -----B

2.

On 1st october 2020, the building was purchased for $800000, and have salvage value = $100000, the useful value = 35 years,

The straight line depreciation = (Cost - salvage value) / useful life

Depreciation = (800000 -100000) /35 years = $700000/35

Depreciation for year = $ 20000,

Since the asset is acquired on 1st october 2020, the depreciation will be $5000 for 2020

and full depreciation will be charged for $20000 for 2021..

Thus while accumulation of depreciation for 2020 and 2021 on 12/31/2020 will be $5000+ $20000 = $25000.

The correct option is ----D. i.e Accumulated depreciation at 12/31/20 is $25000.

3.

Stock holders equity includes the contribution available for equity shareholders, it includes the common stock , additional paid up capital and retained earning and whereas the treasury stock is the repurchased stock from the common stock hence it is excluded from the equity stock holders:

Thus stock holders equity = Common stock + Additional paid in capital + Retained earning - Treasury stock

Stockholders Equity = 45000+81000+336000 - 18000

Stockholders equity = $444000

Thus the correct option is ----D i.e $444000