Learning Materials
Features
Discover
Chapter 9: 15RQ (page 488)
What is a natural resource? What is the process by which businesses spread the allocation of a natural resource’s cost over its usage?
Natural resources are assets that come from the earth and the process of spreading the allocation of natural resources is known as depletion.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Selling an asset at gain or loss Peter Company purchased equipment on January 1, 2018, for \(28,000. Suppose Peter Company sold the equipment for \)4,000 on December 31, 2019. Accumulated Depreciation as of December 31, 2019, was $11,000. Journalize the sale of the equipment, assuming straight-line depreciation was used.
Determining asset cost and recording partial-year depreciation, straight-line Discount Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:
a. Purchase price of three acres of land $ 80,000
b. Delinquent real estate taxes on the land to be paid by Discount Parking 6,300
c. Additional dirt and earthmoving 9,000
d. Title insurance on the land acquisition 3,200
e. Fence around the boundary of the property 9,600
f. Building permits for the building 1,000
g. Architect’s fee for the design of the building 20,700
h. Signs near the front of the property 9,300
i. Materials used to construct the building 215,000
j. Labor to construct the building 175,000
k. Interest cost on the construction loan for the building 9,400
l. Parking lots on the property 28,500
m. Lights for the parking lots 11,200
n. Salary of construction supervisor (80% to building; 20% to parking lot and concrete walks) 50,000
o. Furniture 11,200
p. Transportation of furniture from seller to the building 2,200
q. Additional fencing 6,600
Discount Parking depreciates land improvements over 15 years, buildings over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value’s
Requirements
1. Set up columns for Land, Land Improvements, Building, and Furniture. Show how to account for each cost by listing the cost under the correct account. Determine the total cost of each asset.
2. All construction was complete and the assets were placed in service on October 1. Record partial-year depreciation expense for the year ended December 31. Round to the nearest dollar
Question: Accounting for natural resources Conseco Oil, Inc. has an account titled Oil and Gas Properties. Conseco paid \(6,600,000 for oil reserves holding an estimated 1,000,000 barrels of oil. Assume the company paid \)570,000 for additional geological tests of the property and $450,000 to prepare for drilling. During the first year, Conseco removed and sold 72,000 barrels of oil. Record all of Conseco’s transactions, including depletion for the first year.
Exchanging plant assets Micron Precision, Inc. purchased a computer for \(2,500, debiting Computer Equipment. During 2016 and 2017, Micron Precision, Inc. recorded total depreciation of \)1,600 on the computer. On January 1, 2018, Micron Precision, Inc. traded in the computer for a new one, paying \(2,100 cash. The fair market value of the new computer is \)3,900. Journalize Micron Precision, Inc.’s exchange of computers. Assume the exchange had commercial substance.
How do land improvements differ from land?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App