Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation

The following events took place at Pete's Painting Company during 2017:

On January 1, Pete bought a used truck for $14,000. He added a tool chest and side racks for ladders for $4,000. 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 $4,270. These items had fair market values as follows:

10 cases of paint trays and roller covers	$300
Storage cabinets	1,800
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 $1,548 for a three-year license to operate the business.

On September 1, Pete sold an old truck for $5,590 that had cost $14,520 when it was purchased on September 1, 2012. It was expected to last eight years and have a salvage value of $600. Pete used the straight line method of depreciation.

Required:

Question Content Area

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

Asset	Relevant Value
a. Recorded cost of truck	$18,000
b. Part 1 - recorded amount of supplies	$210
b. Part 2 - recorded cost of office furniture	$1,260
b. Part 3 - recorded cost of equipment	$2,800
c. Recorded cost of prepaid license	$1,548
d. Book value of truck at time of sale	$ fill in the blank

2. Determine the amount of depreciation or other expense to be recorded for each asset for 2017. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

Asset	2017 Expense Amount
a. Truck depreciation	$fill in the blank
b. Part 1 - supplies expense	$fill in the blank
b. Part 2 - office furniture depreciation	$fill in the blank
b. Part 3 - equipment depreciation	$fill in the blank
c. License amortization	$fill in the blank
d. Part 1 - old truck depreciation	$fill in the blank
d. Part 2 - gain/loss on the sale (use the minus sign to indicate a loss)	$fill in the blank

Feedback Area

Feedback

Determine value at time of purchase. Use the fair market values of the supplies expense, office furniture and equipment at the time of purchase. Determine value of prepaid license.

Compute the amount of the prepaid license expense that is used in the current year. Compute book value of the truck at the time of sale.

Question Content Area

3. How would these assets appear on the balance sheet as of December 31, 2017?

Pete's Painting Company Balance Sheet (Partial) December 31, 2017

Current assets:
Accumulated depreciationCashEquipmentLicense expensePrepaid licensePrepaid license		$Prepaid license ( Fill in the blank )
Property, plant, and equipment:
License expensePrepaid licenseSupplies expenseTruckTruck depreciationTruck	$Truck	Fill in the blank
CashLicense expenseOffice furnitureOffice furniture expensePrepaid licenseOffice furniture	Office furniture	Fill in the blank
CashEquipmentEquipment expensePrepaid licenseSupplies expenseEquipment	Equipment	Fill in the blank
	$fill in the blank
Accumulated depreciationCashDepreciation expensePrepaid licenseSupplies expenseAccumulated depreciation	Accumulated depreciation	Fill in the blank
Total property, plant, and equipment, net		$fill in the blank

Fill in the blanks for the problems listed above.