APPLY THE CONCEPTS: Measure and record the purchase of a fixed asset On July 1,
ID: 2576178 • Letter: A
Question
APPLY THE CONCEPTS: Measure and record the purchase of a fixed asset On July 1, 2011, Galaxy Sun Industries purchased new equipment from Acme Equipment Company that had a purchase price (including sales tax) of $89,700. Acme charged $2,000 to deliver the equipment and $8,000 to install it at Galaxy Sun's site. Galaxy Sun's accountant provided the payment for the equipment, delivery, and installation to Acme that day. Galaxy Sun had its own master-level employees perform trial runs on the equipment. This took 10 hours, and those employees earn $30 per hour. During the trial runs, there was some damage to one of the walls beside the equipment. GalaxSun's maintenance staff repaired the wall. The cost for the maintenance wages was $100. All wages for trial runs and wall repair will be paid at the end of the following week Which of the following costs that Galaxy Sun will capitalize as part of the cost of the equipment? $300 $8,000 $2,000 $89,700 $100 Which of the following costs that Galaxy Sun will expense immediately? $100 $300 $8,000 $2,000 $30 capitalize capitalize capitalize I not capitalize not immediately not immediately I not immediatelyExplanation / Answer
Which of the following costs that Galaxy Sun will capitalize as part of the cost of the equipment $300 Capitalized $8,000 Capitalized $2,000 Capitalized $89,700 Capitalized $100 Not Capitalized Which of the following costs that Galaxy Sun will expense immediately? $100 not immediately $300 not immediately $8,000 Immediately $2,000 Immediately $30 Not immediately Journal Entry Prepare the journal entry to record the purchase of the equipment. Equipment ($89700+8000+2000+$300) $100,000 Cash $99,700 Wages Payable $300 The equipment purchased by Galaxy Sun Industries (see the journal entry above) is expected to have a useful life of four years. At the end of its useful life, the residual value of the equipment is estimated to be $6,000. Galaxy Sun Industries's fiscal year ends each December 31. In the table to the below, calculate the equipment's depreciation expense, the balance of accumulated depreciation, and the book value for each year the equipment is expected to be in service, using the straight-line method. Depreciation = ($100,000 - 6000)/4 $23,500 Straight-Line Method Year Depreciation Expense Accumulated Depreciation Book Value 2011 $11,750 $11,750 $88,250 2012 $23,500 $35,250 $64,750 2013 $23,500 $58,750 $41,250 2014 $23,500 $82,250 $17,750 2015 $11,750 $94,000 $6,000