The following expenditures relating to plant assets were made by Spaulding Company during
E9-1 The following expenditures relating to plant assets
were made by Spaulding Company during the first 2 months of 2011.
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery
was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions
(a) Explain the application of the cost principle in determining the acquisition cost of
plant assets.
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title
to which each expenditure should be debited.
TUTORIAL PREVIEW
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery
was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions
(a) Explain the application of the cost principle in determining the acquisition cost of
plant assets.
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title
to which each expenditure should be debited.
TUTORIAL PREVIEW
(a)
Under the cost
principle, the acquisition cost for a plant asset includes all expenditures
necessary to acquire the asset and make it ready
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