1
Class – PP&E, also known as plant assets, are important to the operation of any business as you might imagine.
Using the guidance above, consider what assets are needed to run the business and consider how you might actually pay for them?
2
In the spotlight about FedEx Corporation, you get a feel for the amount of investment in assets and the resulting liabilities that are required to operate a competitive corporation. Even small businesses require plant, property, and equipment to compete and normally rely on some form of debt to finance themselves. Let’s start up a company that sells auto parts, like Napa or Auto Zone. What assets would we require? How might we finance them?
3.
what is depreciation? What are the different methods and when would each be appropriate? How do we apply this concept to natural resources? Intangibles?
4,
he unadjusted trial balance and income statement amounts from the December 31 adjusted trial balance of Anderson Production Company follows.
| Anderson Production Company | ||||
| Account | Unadjusted
Trial Balance |
From the Adjusted
Trial Balance |
||
| Cash | 14,100 | |||
| Prepaid rent | 800 | |||
| Equipment | 42,000 | |||
| Accumulated depreciation | 3,400 | |||
| Accounts payable | 5,100 | |||
| Salary payable | ||||
| Unearned service revenue | 9,100 | |||
| Income tax payable | ||||
| Notes payable, long-term | 16,000 | |||
| Common stock | 8,600 | |||
| Retained earnings | 8,500 | |||
| Dividends | 1,400 | |||
| Service revenue | 13,200 | 19,500 | ||
| Salary expense | 4,300 | 4,600 | ||
| Rent expense | 1,300 | 1,600 | ||
| Depreciation expense | 700 | |||
| Income tax expense | 1,500 | |||
| Total | 63,900 | 63,900 | 8,400 | 19,500 |
Journalize one of the adjusting and one of the closing entries of Anderson Production Company at December 31. Note that there was only one adjustment to Service Revenue.
5
This is a good exercise to practice recording the cost of plant assets.
Paul
E7-15A Murphy Self Storage purchased land, paying $150,000 cash as a down payment and signing a $180,000 note payable for the balance. Murphy also had to pay delinquent property tax of $2,500, title insurance costing $5,500, and $5,000 to level the land and remove an unwanted building. The company paid $54,000 to add soil for the foundation and then constructed an office building at a cost of $750,000. It also paid $51,000 for a fence around the property, $11,000 for the company sign near the property entrance, and $2,000 for lighting of the grounds. What is the capitalized cost of each of Murphy’s land, land improvements, and building?
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