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Exam 10: Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

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Question 21

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Use the following to answer questions In its 2016 annual report to shareholders,Plank Breweries included the following note: Fixed Assets Fixed assets consist of the following (in $ thousands): Total depreciation expense was approximately $2.121 million and $2.179 million for the years ended December 31,2016 and 2015,respectively. Also,Plank Breweries reported the following information in its annual report (in $ thousands): Required: -Show the journal entry to record Plank's disposal of the fixed assets during 2016.

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Question 22

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In a nonmonetary exchange of equipment,if the exchange has commercial substance,a gain is recognized if:

A) The fair value of the equipment received exceeds the book value of the equipment received.
B) The book value of the equipment received exceeds the fair value of the equipment given up.
C) The fair value of the equipment surrendered exceeds the book value of the equipment given up.
D) None of these answer choices are correct.

E) B) and C)
F) B) and D)

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Question 23

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Which of the following does not pertain to accounting for asset retirement obligations?

Why would an oil company argue to use the full-cost method of accounting for oil and gas exploration costs?

Ford Inc.exchanged land and $7,500 cash for material handling equipment.The land had a book value of $75,000 and a fair value of $105,000.Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.

Amortization of capitalized computer software costs is:

Interest may be capitalized:

Donated assets are recorded at:

Research and development (R&D) costs:

During 2016,Prospect Oil Corporation incurred $4,000,000 in exploration costs for each of 15 oil wells drilled in 2016.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 2016,what amount of these exploration costs would remain in its 12/31/16 balance sheet?

During the current year,Brewer Company acquired all of the outstanding common stock of Miller Inc.paying $12,000,000 cash.The book values and fair values of Miller's assets and liabilities acquired are listed below: Required: Prepare the journal entry to record the acquisition by Brewer Company.

Use the following to answer questions Montana Mining Co.(MMC) paid $200 million for the right to explore and extract rare metals from land owned by the state of Montana.To obtain the rights,MMC agreed to restore the land to a suitable condition for other uses after its exploration and extraction activities.MMC incurred exploration and development costs of $60 million on the project. MMC has a credit-adjusted risk free interest rate is 7%.It estimates the possible cash flows for restoring the land,three years after its extraction activities begin,as follows: -The asset retirement obligation (rounded) that should be recognized by MMC at the beginning of the extraction activities is:

If a company incurs disposition obligations as a result of acquiring an asset:

Asset retirement obligations:

How are donated assets recorded?

The initial cost of property,plant,and equipment includes all the identifiable expenditures necessary to bring the asset to its desired condition and location for use.

Grab Manufacturing Co.purchased a 10-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 10-ton draw press is:

Property,plant,and equipment and intangible assets are:

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:

Why are software development costs treated differently than other types of R&D?