# Prepare the journal entry to record depletion expense for the first year

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 BRIEF EXERCISES

BE10-1.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Determine the cost of land.(LO 1)
The following expenditures were incurred by McCoy Company in purchasing land: cash price \$50,000, accrued taxes \$3,000, attorneys' fees \$2,500, real estate broker's commission \$2,000, and clearing and grading \$3,500. What is the cost of the land?

BE10-2.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Determine the cost of a truck.(LO 1)
Rich Castillo Company incurs the following expenditures in purchasing a truck: cash price \$30,000, accident insurance \$2,000, sales taxes \$2,100, motor vehicle license \$100, and painting and lettering \$400. What is the cost of the truck?

BE10-3.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Compute straight-line depreciation.(LO 2)
Corales Company acquires a delivery truck at a cost of \$38,000. The truck is expected to have a salvage value of \$6,000 at the end of its 4-year useful life. Compute annual depreciation expense for the first and second years using the straight-line method.

BE10-4.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Compute depreciation and evaluate treatment.(LO 2),
Chisenhall Company purchased land and a building on January 1, 2014. Management's best estimate of the value of the land was \$100,000 and of the building \$200,000. However, management told the accounting department to record the land at \$220,000 and the building at \$80,000. The building is being depreciated on a straight-line basis over 15 years with no salvage value. Why do you suppose management requested this accounting treatment? Is it ethical?

BE10-5.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Compute declining-balance depreciation.(LO 2)
Depreciation information for Corales Company is given in BE10-3. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.

BE10-6.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Compute depreciation using the units-of-activity method.(LO 2)
Rosco Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi no. 10 cost \$39,500 and is expected to have a salvage value of \$500. Taxi no. 10 is driven 30,000 miles in year 1 and 20,000 miles in year 2. Compute the depreciation for each year.

BE10-7.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Compute revised depreciation.(LO 2)
On January 1, 2014, the Morgantown Company ledger shows Equipment \$32,000 and Accumulated Depreciation—Equipment \$9,000. The depreciation resulted from using the straight-line method with a useful life of 10 years and salvage value of \$2,000. On this date, the company concludes that the equipment has a remaining useful life of only 4 years with the same salvage value. Compute the revised annual depreciation.

BE10-8.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare entries for delivery truck costs.(LO 3)
Flaherty Company had the following two transactions related to its delivery truck.

 [img alt="" border="0" height="1" width="20" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> 1. Paid \$45 for an oil change. [img alt="" border="0" height="5" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> 2. Paid \$400 to install special gear unit, which increases the operating efficiency of the truck.
Prepare Flaherty's journal entries to record these two transactions.

BE10-9.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare entries for disposal by retirement.(LO 4)
Prepare journal entries to record the following.

 (a) Sound Tracker Company retires its delivery equipment, which cost \$41,000. Accumulated depreciation is also \$41,000 on this delivery equipment. No salvage value is received.

 (b) Assume the same information as (a), except that accumulated depreciation is \$37,000, instead of \$41,000, on the delivery equipment.

BE10-10.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare entries for disposal by sale.(LO 4)
Gunkelson Company sells equipment on September 30, 2014, for \$18,000 cash. The equipment originally cost \$72,000 and as of January 1, 2014, had accumulated depreciation of \$42,000. Depreciation for the first 9 months of 2014 is \$5,250. Prepare the journal entries to (a) update depreciation to September 30, 2014, and (b) record the sale of the equipment.

BE10-11.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare depletion expense entry and balance sheet presentation for natural resources.(LO 5)
Franceour Mining Co. purchased for \$7 million a mine that is estimated to have 35 million tons of ore and no salvage value. In the first year, 5 million tons of ore are extracted and sold.

 (a) Prepare the journal entry to record depletion expense for the first year.

 (b) Show how this mine is reported on the balance sheet at the end of the first year.

BE10-12.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare amortization expense entry and balance sheet presentation for intangibles.(LO 6)
Campanez Company purchases a patent for \$140,000 on January 2, 2014. Its estimated useful life is 10 years.

 (a) Prepare the journal entry to record amortization expense for the first year.

 (b) Show how this patent is reported on the balance sheet at the end of the first year.

BE10-13.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Classify long-lived assets on balance sheet.(LO 7)
Information related to plant assets, natural resources, and intangibles at the end of 2014 for Dent Company is as follows: buildings \$1,100,000; accumulated depreciation—buildings \$600,000; goodwill \$410,000; coal mine \$500,000; accumulated depletion—coal mine \$108,000. Prepare a partial balance sheet of Dent Company for these items.

BE10-14.
 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Analyze long-lived assets.(LO 7)
In a recent annual report, Target reported beginning total assets of \$44.1 billion; ending total assets of \$44.5 billion; and net sales of \$63.4 billion. Compute Target's asset turnover.

BE10-15.
[img align="absmiddle" alt="" border="0" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/CMS/image_n/asterisk_i.png">

 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare entry for disposal by exchange.(LO 8)
Olathe Company exchanges old delivery equipment for new delivery equipment. The book value of the old delivery equipment is \$31,000 (cost \$61,000 less accumulated depreciation \$30,000). Its fair value is \$24,000, and cash of \$5,000 is paid. Prepare the entry to record the exchange, assuming the transaction has commercial substance.

BE10-16.
[img align="absmiddle" alt="" border="0" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/CMS/image_n/asterisk_i.png">

 [img alt="" border="0" height="1" width="50" src="http://edugen.wiley.com/edugen/courses/crs7040/common/art/pixel.gif"> Prepare entry for disposal by exchange.(LO 8)
Assume the same information as BE10-15, except that the fair value of the old delivery equipment is \$33,000. Prepare the entry to record the exchange.

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