Exercise 8-1 Acquisition Cost

Discount of purchase, freight cost, pollution control device installed fee and architect’s fee should be considered as acquisition cost.

So the acquisition cost=$60,000-2%*60,000+1,000+2,500+6,000=$68,300

Exercise 8-2 Lump-Sum Purchase

The total market value of land, building and equipment is $200,000+150,000+250,000=$600,000

So the acquisition cost allocate to each assets is as following:

Land=$520,000*200,000/600,000=$173,333

Building=$520,000*150,000/600,000=$130,000

Equipment=$520,000*250,000/600,000=$216.667

The journal entry to record the acquisition:

January 1, 2014 Land $173,333

Building $130,000

Equipment $216.667

Cash $520,000

Exercise 8-6 Asset Disposal

1.

Depreciation expense per year= ($60,000-6,000)/6=$9,000

So, depreciation expense for 2014=$9,000/2= $4,500

Journal entry to record depreciation for 2014:

July 1, 2014 Depreciation Expense $4,500

Accumulated Depreciation—Assets $4,500

Journal entry to record transaction for the sale of assets:

July 1, 2014 Cash $40,000

Accumulated Depreciation—Assets $22,500

Assets $60,000

Gain on Sale of Assets $2,500

2. Gain and loss on sale of assets is recorded under Other Income/Expense section in Income Statement. Gain and loss on sale of assets is non-operating income/expense. Gain occurs when the selling price of the asset higher than its book value, while a loss occurs when the selling price of the asset is lower than book value.

Exercise 8-11 Capital versus Revenue Expenditures
The new conveyor system installed in the building, cost $40,000, should be capitalized; a hydraulic lift system installed on the truck, cost of $5,000, should be capitalized. Other cost of repairing and painting to keep the asset operating normally should be