Chapter Ten Maria Fonseca……………….

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Chapter Ten Maria Fonseca

Challenge Exercise 10-1

Expands on: E10-2

LO: 1

Fluffier Company incurred the following costs.

1. Sales tax on factory machinery purchased, $7,000.

2. Painting of and lettering on truck immediately upon purchase, $800.

3. Installation and testing of factory machinery, $2,500.

4. Real estate broker’s commission on land purchased $4,500.

5. Insurance premium paid for first year’s insurance on new truck $930.

6. Cost of landscaping on property purchased $9,200.

7. Cost of paving parking lot for new building, $18,700.

8. Cost of clearing, draining, and filling land, $14,400.

9. Architect’s fees on self-constructed building, $11,000.

Instructions:

a) Indicate to which account Trudy would debit each of the costs.

b) Explain why item 1 is not debited to an expense account.

c) Explain why items 7 and 8 are debited to different accounts.

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Chapter Ten Maria Fonseca Challenge Exercise 10-1 Expands on: E10-2 LO: 1 Fluffier Company incurred the following costs. 1. Sales tax on factory machinery purchased, $7,000. 2. Painting of and lettering on truck immediately upon purchase, $800. 3. Installation and testing of factory machinery, $2,500. 4. Real estate broker’s commission on land purchased $4,500. 5. Insurance premium paid for first year’s insurance on new truck $930. 6. Cost of landscaping on property purchased $9,200. 7. Cost of paving parking lot for new building, $18,700. 8. Cost of clearing, draining, and filling land, $14,400. 9. Architect’s fees on self-constructed building, $11,000. Instructions: a) Indicate to which account Trudy would debit each of the costs. b) Explain why item 1 is not debited to an expense account. c) Explain why items 7 and 8 are debited to different accounts. Fluffier company Debit credit $2,500 $18,700 $7,000 $14,400 $800 $11,000 $4,500 total amount Challenge Exercise 10-2 Expands on: E10-11 LO: 3 Grace Company owns equipment that cost $70,000 when purchased on January 1, 2017. It has been depreciated using the straight-line method based on estimated salvage value of $7,000 and an estimated useful life of 5 years. Instructions: Prepare Grace Company’s…

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