Problem 8-6 (Algorithmic) Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation

The following events took place at Pete's Painting Company during 2012:

On January 1, Pete bought a used truck for $14,000. He added a tool chest and side racks for ladders for $4,400. The truck is expected to last four years and then be sold for $1,200. Pete uses straight-line depreciation.

On January 1, he purchased several items at an auction for $3,060. These items had fair market values as follows:

10 cases of paint trays and roller covers	$200
Storage cabinets	900
Ladders and scaffolding	4,000

Pete will use all of the paint trays and roller covers this year. The storage cabinets are expected to last nine years; the ladders and scaffolding, four years.

On February 1, Pete paid the city $1,944 for a three-year license to operate the business.

On September 1, Pete sold an old truck for $4,280 that had cost $11,060 when it was purchased on September 1, 2007. It was expected to last eight years and have a salvage value of $500.

Required:

1. For each situation, determine the value assigned to the asset when it is purchased [or for (d), the book value when sold]. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

Asset	Relevant Value
a. Recorded cost of truck	$
b. Part 1 - recorded amount of supplies	$
b. Part 2 - recorded cost of office furniture	$
b. Part 3 - recorded cost of equipment	$
c. Recorded cost of prepaid license	$
d. Book value of truck at time of sale	$

2. Determine the amount of depreciation or other expense to be recorded for each asset for 2012. Enter all amounts as positive numbers except if there is a loss in part d. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

Asset	2012 Expense Amount
a. Truck depreciation	$
b. Part 1 - supplies expense	$
b. Part 2 - office furniture depreciation	$
b. Part 3 - equipment depreciation	$
c. License amortization	$
d. Part 1 - old truck depreciation	$
d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss)	$