Reference no: EM132805925

Question - Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation

The following events took place at Pete's Painting Company during 2016:

1. On January 1, Pete bought a used truck for $14,000. He added a tool chest and side racks for ladders for $4,400. The truck is expected to last four years and then be sold for $1,200. Pete uses straight-line depreciation.

2. On January 1, he purchased several items at an auction for $3,185. These items had fair market values as follows:

3. 10 cases of paint trays and roller covers $300 Storage cabinets 1,800 Ladders and scaffolding 2,800

4. Pete will use all of the paint trays and roller covers this year. The storage cabinets are expected to last nine years; the ladders and scaffolding, four years.

5. On February 1, Pete paid the city $1,440 for a three-year license to operate the business.

6. On September 1, Pete sold an old truck for $4,770 that had cost $12,170 when it was purchased on September 1, 2011. It was expected to last eight years and have a salvage value of $650.

Required -

1. For each situation, determine the value assigned to the asset when it is purchased [or for (d), the book value when sold]. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

a. Recorded cost of truck

b. Part 1 - recorded amount of supplies

b. Part 2 - recorded cost of office furniture

b. Part 3 - recorded cost of equipment

c. Recorded cost of prepaid license

d. Book value of truck at time of sale

2. Determine the amount of depreciation or other expense to be recorded for each asset for 2016. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

a. Truck depreciation

b. Part 1 - supplies expense

b. Part 2 - office furniture depreciation

b. Part 3 - equipment depreciation

c. License amortization

d. Part 1 - old truck depreciation

d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss)