Chapter 8 Property, Plant, and Equipment, and Intangibles

Exercise 8-9 Impact of transactions involving operating assets on statement of cash flows.

(“O” Operating activities), (“I” Investing activities), (“F” financing activities), (“N” not separately reported).

Purchase of land: I

Proceeds from sale of land: I

Gain on sale of land: O

Purchase of equipment: I

Depreciation expense: O

Proceeds from sale of equipment: I

Loss on sale of equipment: O

Exercise 8-10 Impact of transactions involving intangible assets on statement of cash flows.

(“O” Operating activities), (“I” Investing activities), (“F” financing activities), (“N” not separately reported).

Cost incurred to acquire copyright: I

Proceeds from sale of patent: I

Gain on sale of patent: O

Research and development costs: N

(not separately reported as an operating activity)

Amortization of patent: O

Exercise 8-11 Capital versus revenue expenditures

Capital versus Revenue Expenditures On January 1, 2008, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2010:

• The building was painted at a cost of $5,000.

• To prevent leaking, new windows were installed in the building at a cost of $10,000.

• To improve production, a new conveyor system was installed at a cost of $40,000.

• The delivery truck was repainted with a new company logo at a cost of $1,000.

• To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000.

• The truck’s engine was overhauled at a cost of $4,000.

Required

1. Determine which of those costs should be capitalized. Also identify and analyze the effect of the capitalized costs. Assume that all costs were incurred on January 1, 2010.

2. Determine the amount of depreciation for the year 2010. The company uses the straight-line method and depreciates the building over 25 years and the truck over 6 years. Assume zero residual value for all assets.

3. How would the assets appear...