1.

A company incurred the following costs associated with the purchase of a piece of land that it
will use to re-build an office building:
 
      
Purchase price of the land $400,000 
Sale of salvaged parts already on the land $ 20,000 
Demolition of the old building $ 30,000  
Ground-breaking ceremony (food and supplies) $ 1,500 
Land preparation and leveling $ 7,500 

What amount should be recorded for the purchase of the land?

2. Kuchar Corporation purchased equipment on January 1, 2017, for $180,000. The company
estimated the equipment would have a useful life of 10 years with $30,000 salvage value.
Kuchar uses straight-line depreciation. Early in 2019, Kuchar reassessed the equipment's
condition and determined that its total useful life would be only seven years and that it would
have no salvage value. How much would Kuchar report as depreciation expense on this
equipment for 2019?

3. Stenson Inc. owns equipment for which it paid $90 million. At the end of 2017, it had
accumulated depreciation charges on the equipment of $27 million. Due to adverse economic
conditions, Stenson's management determined that it should assess whether impairment should
be recognized for the equipment. The estimated future cash flows (without discounting) to be
provided by the equipment total $60 million, and its fair value at that point totals $40 million.
What amount of impairment would Stenson record, if any?
4. Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is
expected to have a five-year life, run for 18,000 hours and have a residual value of $5,400. The
equipment ran for 2,600 hours in 2021 and 3,900 hours in 2022.
Calculate 2021 and 2022 depreciation expense and 2021 year-end book value using:
1. Straight-line depreciation
2. Double declining balance depreciation
3. Sum-of-the-years’-digits depreciation
4. Activity based depreciation
5. On January 1, 2021, Dreamworld Co. began construction of a new warehouse. The building was
finished and ready for use on September 30, 2022. Expenditures on the project were as follows:

January 1, 2021 $ 300,000

September 1, 2021 $ 450,000
December 31, 2021 $ 450,000
March 31, 2022 $ 450,000
September 30, 2022 $ 300,000

Dreamworld borrowed $1,000,000 on a construction loan with 6% interest. Additionally,

Dreamworld had $5,000,000 in 12% bonds outstanding through both years.

For both 2021 and 2022, calculate the following:

a. Average accumulated expenditures
b. Amount of interest to be capitalized
c. Value of the warehouse reported on the year-end balance sheet.
6. Broadway Ltd. purchased equipment on January 1, 2019, for $800,000, estimating a five-year
useful life and no residual value. In 2019 and 2020, Broadway depreciated the asset using the
straight-line method. In 2021, Broadway changed to sum-of-years'-digits depreciation for this
equipment.

What depreciation would Broadway record for the year 2021 on this equipment?