Question Description
Determine cost of plant acquisitions.
E9-1The following expenditures relating to plant assets were made by Spaulding Company
during the first 2 months of 2011.
- Paid $5,000 of accrued taxes at time plant site was acquired.
- Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery
was in transit. - Paid $850 sales taxes on new delivery truck.
- Paid $17,500 for parking lots and driveways on new plant site.
- Paid $250 to have company name and advertising slogan painted on new delivery truck.
- Paid $8,000 for installation of new factory machinery.
- Paid $900 for one-year accident insurance policy on new delivery truck.
- 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.
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title
to which each expenditure should be debited.
E9-7Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck
has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated
useful life of 8 years.Actual miles driven were 15,000 in 2011 and 12,000 in 2012.