This problem continues our accounting for Pure Water, Inc., from Chapter 7 . During 2012, Pure
Water made the following purchases:
■ On May 3, Pure Water, Inc., purchased a copy machine for $2,400 cash. The copy machine has an estimated useful life of five years and no salvage value. Pure Water uses double-declining-balance depreciation for the copy machine.
■ On May 18, Pure Water, Inc., purchased a $35,800 truck financed by a note payable bearing 8% annual interest. The truck has an estimated useful life of 200,000 miles and a residual value of $5,800. The truck was driven 28,000 miles in 2012 and is depreciated using the units-of-production method.
■ On June 2, Pure Water, Inc., paid $17,000 for land.
■ On June 22, $3,600 of furniture was purchased on account. The furniture has a five year life and a residual value of $600. Furniture is depreciated using straightline depreciation.
■ On August 10, $1,500 of furniture was purchased. The furniture has a five-year life and no residual value, and is depreciated using straight-line depreciation.
■ On September 1, Pure Water, Inc., purchased a building for $100,000 financed by a mortgage bearing 6% annual interest. The building has an estimated salvage value of $10,000 and is being depreciated over 40 years using the straight-line method.

1. Calculate the depreciation expense as of December 31, 2012, for all assets purchased in 2012.
2. Assuming these are Pure Water’s only assets, how will fixed assets be reflected on
the balance sheet at December 31, 2012?

  • CreatedApril 29, 2014
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