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Lecture 9 PPE Extra Practice Questions Set 2

The document discusses accounting principles related to property, plant and equipment. It includes examples of journal entries to record the disposal of equipment and buildings, and the construction of a new building. It also provides expenditures related to a construction project and asks to prepare a schedule separating the amounts between Land, Buildings, and Machinery accounts.

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46 views2 pages

Lecture 9 PPE Extra Practice Questions Set 2

The document discusses accounting principles related to property, plant and equipment. It includes examples of journal entries to record the disposal of equipment and buildings, and the construction of a new building. It also provides expenditures related to a construction project and asks to prepare a schedule separating the amounts between Land, Buildings, and Machinery accounts.

Uploaded by

xu xuan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

SCHOOL OF BUSINESS

Subject : Principles of Financial Accounting


Code : ACC1014
Lecture 9 : Property, Plant and Equipment

1. Cambria owns equipment that cost $93,500 with accumulated depreciation of


$64,000. Cambria asks $35,000 for the equipment but sells the equipment for
$33,000. Compute the amount of gain or loss on the sale. The journal entry to
record the disposal of the asset would involve all of the following except:
A. Debit Accumulated Depreciation $64,000.
B. Credit Equipment $93,500.
C. Debit Loss on Disposal of Equipment $3,500.
D. Credit Gain on Disposal of Equipment $3,500.
E. Debit Cash $33,000.

2. On April 1 of the current year, a company disposed of an automobile that had cost
$20,000. The auto had a residual value of $2,000, and a useful life of 5 years. The
accounting records showed accumulated depreciation for this automobile of $8,100
as of April 1 of the current year. The asset was discarded after an accident, and
$10,500 cash was received from an insurance claim.

Required:
Prepare the journal entry to record the disposal of the automobile.

3. A company needed a new building. It found a suitable location with an existing old
building on the land. The company reached an agreement to buy the land and the
building for $960,000 cash. The old building was demolished to make way for the
needed new building. Following is information regarding the demolition of the old
building and construction of the new one:

Construction cost of new building including $660,000 for parking lot $9,560,000
Demolition of old building 300,000
Proceeds from sale of salvaged materials from old building 120,000

Required:
Prepare a single journal entry to record the above costs assuming all transactions
are paid in cash.

4. A company made the following expenditures in connection with the construction of


its new building:

Architect’s fees for the new building $ 12,000


Cash paid for land and run-down building on the land 300,000

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SCHOOL OF BUSINESS

Removal of old building 18,000


Salvage from sale of old building materials (4,000)
Construction survey to site the new building 1,500
Legal fees for title search 3,000
Excavation for basement construction 25,000
Machinery purchased for operations 100,000
Storage charges on machinery because building was not ready when 900
machinery was delivered
Freight on machinery purchased 1,600
Hauling charges to delivery machinery from storage to new building 300
Construction costs of new building 1,000,00
0
Landscaping 20,000
Installation of machinery 2,500

Required:
Prepare a schedule showing the amounts to be recorded as Land, Buildings, and
Machinery.

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