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Dicorte Brothers manufacturers conveyor belts. Early in January 20X7, Dicorte constructed its own building with barrowed money. The 6% loan was for $900,000. During the year, Dicorte spent the loan amount on construction of the building. At year-end, Dicorte paid the interest for one year.

1. How much should Dicorte record as the cost of the building in 20X7?

2. Record all of Dicorte's transactions during 20X7.

Perry's Tanning Salon bought three tanning beds in a $10,000 lump-sum purchase. An independent appraiser valued the tanning beds as follows:

Tanning Bed                 Appraised Value

1                                     $3,000

2                                       5,000

3                                       4,000

Perry's paid $5,000 in cash and signed a note payable for $5,000. Record the purchase in the journal, identifying each tanning beds cost in a separate Tanning Bed account. Round decimals to three places.

Classify each of the following expenditures as a capital expenditure or an expense related to machinery: (a) purchase price; (b) ordinary recurring repairs to keep the machinery in good working order; (c) lubrication of the machinery before it is placed in service; (d) periodic lubrication after the machinery is placed in service; (e) major overhaul to extend useful life by three years; (f) sales tax paid on the purchase price; (g) transportation and insurance while machinery is in transit from seller to buyer; (h) installation; (i) training of personnel for initial operation of the machinery; (j) income tax paid on income earned from the sale of the products manufactured by the machinery.

a. Capital Expenditure

b. Machinery Expense

c. Capital Expenditure

d. Machinery Expense

e. Capital Expenditure

f. Machinery Expense

g. Capital Expenditure

h. Capital Expenditure

i. Capital Expenditure

j. Machinery Expense

On January 2, Amy's Party Supplies purchased showroom fixtures for $10,000 cash, expecting the fixtures to remain in service five years. Amy's had depreciated the fixtures on a double-declining-balance basis, with zero residual value. On September 30, 20X7, Amy's sold the fixtures for $5,000 cash. Record both the depreciation expense on the fixtures for 20X7 and the sale of the fixtures on September 30, 20X7.

J.B Hunt is a large trucking company. Hunt uses the units-of-production (UOP) method to depreciate trucks because UOP depreciation best measures wear and tear. Hunt trades in used trucks often to keep driver morale high and to maximize fuel efficiency. Consider these facts about one Mack truck in the company's fleet.

When acquired in 20X1, the tractor/trailer rig cost $350,000 and was expected to remain in service for 10 years or 1,000,000 miles. Estimated residual value was $100,000. The truck was driven 80,000 miles in 20X1, 120,000 miles in 20X2, and 160,000 miles in 20X3. After 40,000 miles in 20X4, the company traded in the Mack truck for a less expensive Freightliner. Hunt paid cash of $50,000. Determine Hunt's cost of the new truck. Journal entries are not required.