FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Operational Assets: Acquisition and Disposition

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950,000 cash. Lake assumed all of the liabilities of Huron. Book values and fair values of acquired assets and liabilities were: Lake would record goodwill of:

A) $ 0.
B) $ 75,000.
C) $445,000.
D) $250,000

E) None of the above
F) A) and D)

Correct Answer

verified

Show Answer

Question 22

Essay

Review LaterAdd Note

Review Later

How are donated assets recorded?

Correct Answer

verified

Debit the asset account for va...

View Answer

Show Answer

Question 23

Essay

Review LaterAdd Note

Montgomery Industries spent $600,000 in 2008 on a construction project to build a library. Montgomery also capitalized $30,000 of interest on the project in 2008. Montgomery financed 100% of the construction with a 10% construction loan. The project was completed on September 30, 2009. Additional expenditures in 2009 were as follows: Required: Determine the completed cost of the library. Show supporting computations. $\begin{array}{lr}\text { Feb. 28 } & \$ 90,000 \\\text { Apr. 30 } & 180,000 \\\text { Jul. 1 } & 36,000 \\\text { Sept. 30 } & 64,000\end{array}$

Explain the appropriate accounting method used to account for lump sum purchases of a group of operational assets.

During the current year, Compton Crate Corporation purchased all of the outstanding common stock of Little Lacy Ltd. (LLL), paying $60 million in cash. Compton recorded the assets acquired as follows: The book value of LLL's assets and owners' equity before the acquisition were $50 million and $30 million, respectively. Required: Compute the fair value of LLL's liabilities that Compton assumed in the acquisition. $\begin{array} { l l } \text { Accounts receivable } & \$ 5,500,000 \\\text { Inventory } & 18,000,000 \\\text { Property, plant, and equipment } & 45,500,000 \\\text { Goodwill } & 22,000,000\end{array}$

The successful efforts method of accounting for oil and gas exploration costs allows costs incurred in searching for oil and gas within a large geographical area to be capitalized.

Show the journal entry to record Plank's disposal of the fixed assets during 2009.

Cheney Company sold a 20-ton mechanical draw press for $60,000. The old draw press cost $77,000 and had a book value of $55,000. Required: Prepare the journal entry to record the disposition.

On January 3, 2009, Michelson & Sons acquired a tract of land just outside the city limits. The land and existing building were purchased for $2.4 million. Michelson paid $400,000 and signed a noninterest-bearing note requiring the company to pay the remaining $2,000,000 on December 31, 2010. An interest rate of 7% properly reflects the time value of money for this type of loan agreement. Transfer taxes, title insurance and other costs totaling $24,000 were paid at closing. During February, the old building was demolished at a cost of $120,000, and an additional $100,000 was paid to clear and grade the land. Construction of a new building began on March 1 and was completed on October 30. Construction expenditures were as follows: Michelson did not borrow specifically for the construction project, but did have the following debt outstanding throughout 2009: $6,000,000, 8% long-term note payable $2,000,000, 5% long-term note payable In December, the company purchased equipment and office furniture and fixtures for a lump-sum price of $800,000. The fair values of the equipment and the furniture and fixtures were $540,000 and $360,000, respectively. In December, Michelson paid $340,000 for the construction of parking lots and landscaping. Required: 1. Determine the initial values of the various assets that Michelson acquired or constructed during 2009. 2. How much interest expense will Michelson report in its 2009 income statement? $\begin{array} { l r } \text { March 30 } & \$ 800,000 \\\text { June 30 } & 1,200,000 \\\text { July 30 } & 1,200,000 \\\text { September 1 } & 600,000\end{array}$

Peanut Corporation exchanged land and cash of $6,500 for equipment. The land had a book value of $45,000 and a fair value of $34,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.

Productive assets that are physically consumed in operations are:

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.

The capitalized cost of equipment excludes:

Champion Industries exchanged a dust-scrubbing piece of equipment for another version of the same type of equipment and received $12,000 cash. The old dust scrubber cost $76,200 and had a book value of $54,500. The new dust scrubber had a fair value of $58,500. Required: Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

Dreamworld's average accumulated expenditures for 2009 was:

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:

When selling operational assets for cash:

Dreamworld's capitalized interest in 2009 was:

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

Amortization of capitalized computer software costs is: