Real Estate and Depreciation Accounting
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Questions and Answers

What is the total appraised value of the land purchased by ABC Holdings?

900,000

What was the original cost of the land purchased by ABC Holdings?

750,000

What additional costs were incurred to prepare the land for use by ABC Holdings?

20,500

What is the total value of the building purchased by ABC Holdings after adding the cost of renovations?

<p>305,000</p> Signup and view all the answers

What is the total cost of the land improvements (parking lot)?

<p>5,000</p> Signup and view all the answers

What is the total amount of cash received by ABC Holdings from the salvage of fixtures from "Building 2"?

<p>2,000</p> Signup and view all the answers

What is the total amount of cash paid by ABC Holdings for the land and buildings?

<p>1,200,000</p> Signup and view all the answers

What is the total amount of cash paid by ABC Holdings for the land and building improvements?

<p>1,240,000</p> Signup and view all the answers

What is the cost of the equipment purchased by the company on July 1, 2014?

<p>42,500</p> Signup and view all the answers

What is the expected salvage value of the vehicle at the end of its useful life?

<p>2,500</p> Signup and view all the answers

What is the useful life of the vehicle in years?

<p>4</p> Signup and view all the answers

What is the useful life of the vehicle in kilometers?

<p>100,000</p> Signup and view all the answers

How many kilometers was the vehicle driven in 2014?

<p>20,000</p> Signup and view all the answers

What is the depreciation expense for the vehicle in 2014 using the straight-line method?

<p>10,000</p> Signup and view all the answers

What is the book value of the vehicle at the end of 2014 using the straight-line method?

<p>32,500</p> Signup and view all the answers

What is the depreciation expense for the vehicle in 2014 using the double-declining balance method?

<p>10,625</p> Signup and view all the answers

What is the book value of the vehicle at the end of 2014 using the double-declining balance method?

<p>31,875</p> Signup and view all the answers

What is the depreciation expense for the vehicle in 2014 using the units of production method?

<p>10,625</p> Signup and view all the answers

What is the book value of the vehicle at the end of 2014 using the units of production method?

<p>31,875</p> Signup and view all the answers

What is the original cost of the machine in the revised depreciation scenario?

<p>50,000</p> Signup and view all the answers

What is the salvage value of the machine after the modification?

<p>3,000</p> Signup and view all the answers

What is the cost of the module that is added to the machine in the beginning of year 4?

<p>10,000</p> Signup and view all the answers

What is the total useful life of the machine after the modification?

<p>8</p> Signup and view all the answers

What is the original cost of the asset in the disposal scenario?

<p>100,000</p> Signup and view all the answers

What is the accumulated depreciation on the asset at the time of disposal?

<p>75,000</p> Signup and view all the answers

What are the proceeds from the disposal of the asset?

<p>20,000</p> Signup and view all the answers

What is the book value of the asset before the disposal?

<p>25,000</p> Signup and view all the answers

What is the total amount of the loss on disposal of the asset?

<p>5,000</p> Signup and view all the answers

How many computers were sold by the company in 2014?

<p>200</p> Signup and view all the answers

What is the selling price of each computer?

<p>1,000</p> Signup and view all the answers

What is the cost of each computer sold?

<p>700</p> Signup and view all the answers

What percentage of computers sold are expected to be returned for warranty work?

<p>10</p> Signup and view all the answers

What is the average cost of warranty work per computer?

<p>200</p> Signup and view all the answers

What is the actual amount spent on warranty work in 2015?

<p>1,550</p> Signup and view all the answers

What is the amount of the estimated warranty liability recorded at the end of 2014?

<p>4,000</p> Signup and view all the answers

What is the amount of the actual warranty expense incurred in 2015?

<p>1,550</p> Signup and view all the answers

What is the value of the merchandise purchased on credit by the business?

<p>1,000</p> Signup and view all the answers

What is the sales value of merchandise sold on credit?

<p>500</p> Signup and view all the answers

What is the cost of the merchandise sold on credit?

<p>250</p> Signup and view all the answers

What is the amount of GST remitted to the government for January transactions?

<p>25</p> Signup and view all the answers

What is the amount of A's investment in the partnership?

<p>100,000</p> Signup and view all the answers

What is the amount of A's salary allowance?

<p>40,000</p> Signup and view all the answers

What is the total net income for the partnership?

<p>50,000</p> Signup and view all the answers

How much is allocated to A's capital account for the year?

<p>32,500</p> Signup and view all the answers

What percentage of the partnership is allocated to C?

<p>25</p> Signup and view all the answers

What is the total capital of the partnership before C joins?

<p>100,000</p> Signup and view all the answers

What is the total capital of the partnership after C joins?

<p>160,000</p> Signup and view all the answers

What is the amount of A's capital after admitting C?

<p>40,000</p> Signup and view all the answers

What is the amount of C's capital after being admitted?

<p>40,000</p> Signup and view all the answers

What is the total amount of capital allocated to A and B based on their profit-sharing ratio?

<p>52,000</p> Signup and view all the answers

What is the amount of cash received by partner C upon leaving the partnership?

<p>220,000</p> Signup and view all the answers

What is the amount of capital contributed by partner C when they join the partnership?

<p>60,000</p> Signup and view all the answers

What is the original capital balance of partner C?

<p>300,000</p> Signup and view all the answers

What is the amount credited to C's capital account?

<p>300,000</p> Signup and view all the answers

What is the difference in the amount of capital allocated to A and B after C leaves?

<p>80,000</p> Signup and view all the answers

How much is credited to A's capital account?

<p>40,000</p> Signup and view all the answers

Study Notes

Cost of Capital Assets and Recording Costs of Real Estate

  • ABC Holdings purchased land and three buildings for $1,200,000 on March 1, 2024.
  • An appraisal valued the land at $750,000, Building 1 at $250,000, and Building 2 at $0.
  • Additional costs included: $20,000 for land clean-up and leveling, $5,000 for building 1 renovations, $12,000 for building 1 renovations, and $5,000 for parking lot construction.
  • ABC received $2,000 in salvage from fixtures in Building 2.

Depreciation

  • A vehicle was purchased for $42,500 on July 1, 2014.
  • Expected useful life is 4 years or 100,000 km.
  • Expected salvage value is $2,500.
  • In 2014, the vehicle was driven 20,000 km.
  • In 2015, the vehicle was driven 25,000 km.
  • Depreciation methods used were: straight-line, double-declining balance, and units of production.

Revised Depreciation

  • A machine cost $50,000 with a $5,000 salvage value and a 5-year useful life.
  • In year 4, a module was added, increasing usefulness and life to 8 years.
  • The cost of the module was $10,000, and the salvage value decreased to $3,000.
  • Depreciation expense was calculated for year 4.

Disposal of Capital Asset

  • An asset was disposed of with a cost of $100,000.
  • Accumulated depreciation to the date of disposal was $75,000.
  • Proceeds from the disposal were $20,000.
  • Journal entries were prepared for the disposal.

Estimated Warranty Liability

  • In 2014, 200 computers were sold at $1,000 each with a $700 cost.
  • Estimated warranty work is 10% of sales.
  • The average cost of warranty work is $200 (parts and labor).
  • In 2015, $1,550 was spent on warranty work (850 labor).
  • All journal entries were prepared.

GST (Goods and Services Tax)

  • Merchandise was purchased for $1,000 on credit on January 4.
  • Merchandise was sold on credit for $500 (sales value) and $250 (cost) on January 7.
  • Payment for the January 4 purchase was made on January 15.
  • Payment was received for the January 7 transaction on February 1.
  • GST was remitted to the government on February 28.
  • Journal entries (with 5% GST) were prepared.

Partnership & Net Income

  • A partnership was formed with A investing $100,000 and B investing $50,000.
  • Their agreement for profit allocation is as follows;
    • A's salary allowance: $40,000.
    • B's salary allowance: $30,000.
    • 10% interest on investment.
    • Remaining profit will be split equally.
  • Net income was $50,000.
  • Journal entries to allocate net income were prepared.

Withdrawal of Partner

  • A partnership existed with A, B, and C who had capital balances of $100,000, $200,000, and $300,000 respectively.
  • C withdrew, receiving $220,000 cash in full payment.
  • The partnership agreement indicated equal profit sharing between the partners.
  • Journal entries to record the payment to C were prepared.

Admission of New Partner

  • A partnership existed where the partners' agreed capital contribution was as follows; A = $60,000; B = $40,000; C = $60,000.
  • C was to become a 25% interest partner with the contributed capital from C is $60,000
  • Journal entries for admission of C were prepared.

Extra Theory Tips

  • PPE (Property, Plant, and Equipment): Tangible assets with a useful life longer than one accounting period.
  • Capital Expenditures: Costs that increase the asset's value or useful life.
  • Revenue Expenditures: Costs that do not increase the asset's value or useful life.
  • Depreciation: Allocation of an asset's cost over its useful life.
  • Intangible Assets: Non-physical assets with economic value.
  • Current Liabilities: Obligations due within a year.
  • Contingency Liabilities: Potential obligations dependent on future events.
  • Partnerships: Unincorporated businesses with multiple owners.
  • Partnership Agreement: An agreement outlining partnership terms.
  • Mutual Agency: Partners can bind the partnership to contracts.
  • Capital Deficiency: A partner with a negative capital balance.

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Lethbridge College ACC 1175 Unit 1 Practice Questions PDF

Description

This quiz covers the principles of cost allocation for capital assets, specifically focusing on the purchase and recording of real estate and associated costs. Additionally, it explores various depreciation methods and their application on different assets. Prepare to test your understanding of these key accounting concepts.

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