Financial Accounting

Learn the toughest concepts covered in your Financial Accounting class with step-by-step video tutorials and practice problems.

Long Lived Assets

Initial Cost of Long Lived Assets

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Here we focus on the purchase of Fixed Assets that we will use for multiple years.

1

concept

Introduction to Plant Assets (Fixed Assets, PPE)

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11m
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2

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Initial Cost of Land

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3

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Initial Cost of Land (and Leasehold) Improvements

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7m
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4

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Initial Cost of Buildings

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2m
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5
Problem

On July 1, STLC purchased a building from EZ Construction by putting $60,000 as a down payment and signing a $320,000 note payable due in fifteen years. The note payable had an interest rate of 6% due semi-annually. Other details related to the purchase include:$4,200 in delinquent real estate taxes payable by STLC; $6,000 in brokerage commissions paid by EZ Construction; $1,100 in attorney fees paid by STLC; $11,000 for a company sign at the entrance to the property; and $2,000 for lighting around the grounds of the building. The building is expected to last forty years. What will be the journal entry to record the purchase of the building on July 1?

6

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Initial Cost of Equipment and Machinery

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2m
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7
Problem

STLC purchased a new edible underwear production machine at a cost of $14,000. STLC also paid $700 in sales taxes, $1,200 for delivery of the machine, and $1,600 in installation costs. Upon arrival, a special platform needed to be built for the machine to work properly. The special platform cost $4,000. STLC also paid an engineer $1,000 to test the equipment. After successfully installing the machine, STLC insured the machine at a cost of $500. They also spent $150 to lube the gears of the machine. What is the initial depreciable cost of the machine?