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51 terms

Chp 10 accounting

STUDY
PLAY
PPE and intangible assets are
D. long-term revenue producing assets
The acquisition costs of PPE do NOT include
D. Maintenance costs during the first 30 days of use
Productive assets that are physically consumed in operations are
D. Natural resources
The capitalized cost of equipment excludes
A. Maintenance
Asset retirement obligations
D. All of the above are correct
If a company incurs disposition obligations as a result of acquiring an asset
A. The company recognizes the obligation at fair value when the asset is acquired
When selling PPE for cash
B. The seller recognizes a gain or loss for the difference between the cash received and the BOOK VALUE of the asset sold
Grab Manufacturing Co. purchased a ten-ton draw press at a cost of $180,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is:
C. 187600
Holiday Laboratories Laboratories purchased a high speed industrial centrifuge at a cost of $420,000. Shipping costs totaled $15,000. Foundation work to house the centrifuge cost $8,000. An additional water line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $6,000. Materials used up in testing cost $3,000. The capitalized cost is:
A 455000
Vijay Inc. purchased a 3-acre tract of land for a building site for $320,000. On the land was a building with an appraised value of $120,000. The company demolished the old building at a cost of $12,000, but was able to sell scrap from the building for $1,500. The cost of title insurance was $900 and attorney fees for reviewing the contract was $500. Property taxes paid were $3,000, of which $250 covered the period subsequent to the purchase date. The capitalized cost of the land is:
C. 334650
Only July 1, 2011, Larkin Co purchased a $400000 tract of land land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2011 as follows: What would be the balance in the land account as of December 31, 2011?
C. 477000
Assets acquired in a lump sum purchase are valued based on
B. Their relative fair values
Simpson and Homer Corporation Corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely furnished. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and furniture and fixtures, respectively. The initial values of the building, land, and furniture and fixtures would be:
B. Option B
Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,000,000. The building included used but functional equipment. According to independent appraisals, the fair values were $4,500,000, $3,000,000, and $2,500,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be:
C. Option C
Assets acquired under multi-year deferred payment contracts are
B. Valued at the present value of the payments required by the contract
Assets acquired by the issuance of equity securities are valued based on
C. A or B above, whichever is more reasonably determinable
Donated assets are recorded at
D. Fair Value
The fixed-asset turnover ratio provides
C. The amount of sales generated per dollar of fixed assets
The balance sheets of Davidson Corporation reported net fixed assets of $320,000 at the end of 2011. The fixed-asset turnover ratio for 2011 was 4.0 and sales for the year totaled $1,480,000. Net fixed assets at the end of 2010 were:
C. 420000
The basic principle used to value an asset acquired in a nonmonetary exchange is to value it
A. Fair value of asset given up
In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if
C. The fair value of the equipment surrendered exceeds the book value of the equipment given up
Alamos with commercial substance
B. 8000
Alamos lacks commercial substance
D. 0
Horton Stores with commercial substance
B. Option B
Horton Stores lacks commercial substance
C. Option C
Bloomington Inc. exchanged land for equipment and 3000 in cash. The book value and the fair value of the land were $104,000 and $90,000, respectively.
Bloomington would record equipment at and record a gain/(loss) of:
C. 87000, 16000
P. Chang & Co exchanged land and 9000 cash for equipment. The book value and the fair value of the land were $106,000 and $90,000, respectively.
Chang would record equipment at and record a gain/(loss) of:
A. 99000, 16000
Grand Forks Corp Case A
B 75000
Grand Forks Corp Case B
C. (5000)
Pensacola Case A
A. 68000
Pensacola Case B
B. (4000)
Interest may be capitalized
C. Whether or not there is specific borrowing for the construction
Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately, when:
D. All of the above are correct
In computing capitalized interest, average accumulated expenditures
B. Is determined by time-weighting individual expenditures made during the asset construction period
Interest is not capitalized for
C. Inventories routinely and repetitively produced in large quantities
Average accumulated expenditures
A. Is an approximation of the average debt a firm would have outstanding if it financed all construction through debt
The cost of self-constructed fixed assets should
A. Include allocated indirect costs just as they are for production of products
Crocus specific interest 2010
B. 1.95 million
Crocus accumulated expenditures 2011
D. 124.5 million
Crocus specific interest 2011
D. None of the above is correct
Kendall accumulated expenditures for 2011
A. 300000
Kendall interest capitalized 2011
D. 36000
Kendall accumulated expenditures for 2012
D. 1036000
Kendall interest capitalized for 2012
B. 86805
Dreamworld accumulated expenditures 2011
B. 450000
Dreamworld capitalized interest 2011
C. 54000
Dreamworld accumulated expenditures 2012
B. 1554000
Dreamworld final cost
B 2143860
Liddy Corp. began constructing a new warehouse for its operations during the current year. In the year Liddy incurred interest of $30,000 on a working capital loan, and interest on a construction loan for the warehouse of $60,000. Interest computed on the average accumulated expenditures for the warehouse construction was $50,000. What amount of interest should Liddy expense for the year?
B. 40000
During 2011, the Longhorn Oil Company incurred $5,000,000 in exploration costs for each of 20 oil wells drilled in 2011 in west Texas. Of the 20 wells drilled, 14 were dry holes. Longhorn uses the successful efforts method of accounting. Assuming that none of the oil found is depleted in 2011, what oil exploration expense would Longhorn charge for this activity in its 2011 income statement?
C. 70 million
During 2011, Prospect Oil Corporation incurred $4,000,000 in exploration costs for each of 15 oil wells drilled in 2011. Of the 15 wells drilled, 10 were dry holes. Prospect uses the successful efforts method of accounting. Assuming that Prospect depletes 30% of the oil discovered in 2011, what amount of these exploration costs would remain in its 12/31/11 balance
B. 14 million