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    Argosy University/ Phoniex University/
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Category > Accounting Posted 12 Jul 2017 My Price 12.00

Capital versus Revenue Expenditures

Exercise 8-11 Capital versus Revenue Expenditures

On January 1, 2012, Jose Company purchased a building for $200,000 and a delivery truck for

$20,000. The following expenditures have been incurred during 2014:

• The building was painted at a cost of $5,000.

• To prevent leaking, new windows were installed in the building at a cost of $10,000.

• To improve production, a new conveyor system was installed at a cost of $40,000.

• The delivery truck was repainted with a new company logo at a cost of $1,000.

• To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000.

• The truck’s engine was overhauled at a cost of $4,000.

Required

1. Determine which of those costs should be capitalized. Also record the journal entry for the capitalized costs. Assume that all costs were incurred on January 1, 2014.

2. Determine the amount of depreciation for the year 2014. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets.

3. How would the assets appear on the balance sheet of December 31, 2014?

Answers

Maurice Tutor
(5)
Status NEW Posted 12 Jul 2017 10:07 PM My Price 12.00

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