Answer:
Question answered and explained in the Explanation section. Thank you.
Explanation:
A) Acquired a machine by issuing a 5%, 5-year, $100,000 note with no down payment.
Cash (No Effect) Note was issued, no down payment
None Cash (Increased)
Assets (Increased) - Asset acquired
Liabilities (Increased) - Payment must be made
Gains (No Effect)
Expenses (No Effect)
b. Incurred and paid annual interest cost of $40,000, including $8,000 of capitalized interest.
Cash (Decreased) Interest cost paid out of cash
None Cash (No Effect)
Assets (No Effect)
Liabilities (Decreased) - Payment was made for interest
Gains (No Effect)
Expenses (Decreased)
c. Spent $40,000 to upgrade an existing building. The upgrades increased the original useful life of the building.
Cash (Decreased) Cash was paid for the upgrade
None Cash (No Effect)
Assets (Increased) Upgraded existing building increases in value
Liabilities (No Effect)
Gains (No Effect)
Expenses (Increased)
d. Spent $5,000 for routine maintenance on existing manufacturing equipment.
Cash (Decreased) Cash was paid for the maintenance
None Cash (No Effect)
Assets (No Effect)
Liabilities (No Effect)
Gains (No Effect)
Expenses (Decreased)- Maintenance amount already paid
e. Sold a piece of land for $125,000. The original cost of the land was $105,000.
Cash (Increased) Cash made from sale of land
None Cash (No Effect)
Assets (Decreased) - The land sold was an asset
Liabilities (No Effect)
Gains (Increased)
Expenses (No Effect)
