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1)What falls under current assets? A
1)What falls under current assets? A. Accounts payable B. Salary payable C. Inventory 1) A only 2) B only 3) C only 4) A and C only 5) A and B only 6. What falls under current liabilities? A. Marketable security B. Insurance prepayment C. Dividend payable 1) A only 2) B only 3) C only 4) A and C only 5) A and B only
2)Trinkle Co., Inc. made several purchases of long-term assets in Year 1. The details of each purchase are presented here. New Office Equipment 1. List price: $42,000; terms: 2/10 n/30; paid within discount period. 2. Transportation-in: $830. 3. Installation: $460. 4. Cost to repair damage during unloading: $551. 5. Routine maintenance cost after six months: $250. Basket Purchase of Copier, Computer, and Scanner for $52,000 with Fair Market Values 1. Copier, $23,199 2. Computer, $8,151. 3. Scanner, $31,350. Land for New Warehouse with an Old Building Torn Down 1. Purchase price, $79,500. 2. Demolition of building, $4,780. 3. Lumber sold from old building, $2,690. 4. Grading in preparation for new building, $9,000. 5. Construction of new building, $278,000 Required In each of these cases, determine the amount of cost to be capitalized in the asset accounts. Office equipment:
Office equipment: Asset Allocated Costs Office equipment Basket purchase: Asset Allocated Costs Copier Computer Scanner Total
Expert Solution
1)
What falls under current assets?
C. Inventory
Explanation: Current assets are those assets that are cash and cash equivalents, thats is they can be converted into cash in a years time. Inventory is a current assset as the company can sell them and make profits within a short span of time.
Accounts Payable : Its not an asset, its a current liability
Salaries Payable : Current Liability
What falls under current liability?
C. Dividends Payable
Explanation: Like Current Assets, Current liabilities are the dues that the company need to pay off in a short span of time, usually within a year. Dividend payable is a current liability as the shareholders need to paid immediately.
Marketable Security - It is a Current Asset
Prepaid Insurance - It is Current Asset not a liability.
2)
Statement showing allocated costs:
| Office equipment: | |
| Particulars | Amt in $ |
| List price | 42,000 |
| Discount (2% x 42,000) | (840) |
| Transportation-in | 830 |
| Installation | 460 |
| Total cost | 42,450 |
Note =
Cost to repair will not be capitalised as it does add value to the asset. And routine maintenance will also not to be capitalised.
| Basket purchase | |||||
|
Asset |
Fair Value($) |
% of total fair value |
Purchase Price |
Working |
Allocated Costs($) |
| Copier |
23,199 |
37% |
52,000 |
52,000 × 37% |
19,240 |
| Computer |
8,151 |
13% |
52,000 |
52,000 × 13% |
6,760 |
| Scanner |
31,350 |
50% |
52,000 |
52,000 × 50% |
26,000 |
| Total |
62,700 |
52,000 |
| Land and building | ||
| Particulars | Land | Construction Costs |
| Purchase price | 79,500 | |
| Demolition of building | 4,780 | |
| Lumber sold from old building | (2,690) | |
| Grading in preparation for new building | 9,000 | |
| Construction of new building | 278,000 | |
| Total | 90,590 | 278,000 |
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