1. Identify which of the following expenditures is considered as a capital expenditure that must be depreciated (capitalized):
a) Purchased land to build a new facility for $400,000.
b) Installed a water dispenser in a company dining area for $3250.
c) Purchased a spare part for a framing machine for $5,000.
d) Purchased a patent on an energy-saving device over six years at a cost of $42,000.
e) Purchased a fax machine for $8,000.
f) Paid $18,000 to lease a dump truck for eight months.
g) Painted the warehouse building, both interior and exterior, for $16,500.
h) Repaved a parking lot for $15,000.
i) Installed a conveyor belt system to automate some part of a production processes for $25,000.
j) Purchased a new computer system for $5,000.
2. Consider the following data on an asset:
Cost of the asset, I: $35,000
Useful life, N: 6 years
Salvage value, S: $3,000
Compute the annual depreciation allowances and the resulting book values, using the straight-line depreciation method.
3. Consider the following data on an asset:
Cost of the asset, I: $40,000
Useful life, N: 8 years
Salvage value, S: $4,500
Compute the annual depreciation allowances and the resulting book values, using the double-declining-balance method.
4. A company’s accounting record shows the following:
Truck A Truck B
Purchase Cost: $22,500 $45,000
Salvage Value: $2,000 $4,500
Useful Life (miles): 150,000 200,000
Miles Driven During Year: 13,000 24,000
Determine the amount of depreciation for each truck during the year.
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