Question Details

Kennett Company purchased a machine 


Ex. 1
Kennett Company purchased a machine on January 1, 2011. In addition to the purchase price paid, the following additional costs were incurred: (a) sales tax paid on the purchase price, (b) transportation and insurance costs while the machinery was in transit from the seller, (c) personnel training costs for initial operation of the machinery, (d) annual city operating license, (e) major overhaul to extend the life of the machinery, (f) lubrication of the machinery gearing before the machinery was placed into service, (g) lubrication of the machinery gearing after the machinery was placed into service, and (h) installation costs necessary to secure the machinery to the building flooring.
Indicate whether the items (a) through (h) are capital or revenue expenditures in the spaces provided: C = Capital, R = Revenue.

Ex. 2
On July 1, 2011, Jenner Inc. invested $640,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2011, 100,000 tons of or were mined and sold.
Instructions
(a)	Prepare the journal entry to record depletion expense.
(b)	Assume that the 100,000 tons of ore were mined, but only 85,000 units were sold. How are the costs applicable to the 15,000 unsold units reported?




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