The following events took place at Pete's Painting Company during 2012: a. On January 1, Pete bought

Question:

The following events took place at Pete's Painting Company during 2012:
a. On January 1, Pete bought a used truck for $14,000. He added a tool chest and side racks for ladders for $4,800. The truck is expected to last four years and then be sold for $800. Pete uses straight-line depreciation.
b. On January 1, he purchased several items at an auction for $2,400. These items had fair market values as follows:
10 cases of paint trays and roller covers $...............200
Storage cabinets..........................................600
Ladders and scaffolding..............................2,400
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.
c. On February 1, Pete paid the city $1,500 for a three-year license to operate the business.
d. On September 1, Pete sold an old truck for $4,800 that had cost $12,000 when it was purchased on September 1, 2007. It was expected to last eight years and have a of $800.
Required
1. For each situation, explain the value assigned to the asset when it is purchased [or for (d), the book value when sold].
2. Determine the amount of depreciation or other expense to be recorded for each asset for 2012.
3. How would these assets appear on the as of December 31, 2012?
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