Acc280 Financial Accounting: P8-6 The following events took place at Pete's Painting Company

Acc280 Financial Accounting

Problem 8-6 Cost of Assets, Subsequent Book Values, and Balance Sheet Presentation
The following events took place at Pete's Painting Company during 2010:
a. On January 1, Pete bought a used truck for $14,000. He added a tool chest and side racks for ladders for $4,800.The truck is expected to last 4 years and then be sold for $800. Pete uses the straight line depreciation.
b. On January 1, he purchased several items at an auction for $2,400. These items had fair market value as follows:
10 cases of paint trays and roller covers 200
Storage cabinets 600
Ladders and scaffolding 2,400
3,200
Pete will use all of the paint and rollers covers this year. The storage cabinets are expected to last 9 years; the ladders and scaffolding 4 years.
c. On February 1, Pete paid the city $1,500 for a 3 year license to operate the business.
d. On September 1, Pete sold an old truck for $4,800 that had cost $12,000 when it was purchased on September 1, 2005. It was expected to last eight years and have a salvage value of $800

Required:
1. For each situation, explain the value assigned to the asset when it is purchased [or for (d) the book value sold]
2. Determine the amount of depreciation or other expense to be recorded for each asset for 2010.
3. How would these assets appear on a balance sheet as of December 31, 2010?
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