Question

1.      On December 1, 2016, Hogan Co. purchased a tract of land as a factory site for $780,000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2016 were as follows:

Cost to raze old building                                                        $70,000

Legal fees for purchase contract and to record ownership     $10,000

Title guarantee insurance                                                        $16,000

Proceeds from sale of salvaged materials                               $8,000

            In Hogan’s December 31, 2016 balance sheet, what amount should be reported as land?

a.       $806,000

b.      $842,000

c.       $868,000

d.      $876,000

2.      Land was purchased to be used as the site for the consruction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be:

a.       Classified as other income.

b.      Deducted from the cost of the land.

c.       Netted against the costs to clear he land and expensed as incurred.

d.      Netted against the costs to clear the land and amortized over the life of the plant.

3.      A company is constructing an asset for its own use. Construction began in 2015. The asset is being financed entirely with a specific new borrowing. Construction expenditures were made in 2015 and 2016 at the end of each quarter. The total amount of interest cost capitalized in 2016 should be determined by applying the interest rate on the specific new borrowing to the

a.       Total accumulated expenditures for the asset in 2015 and 2016.

b.      Weighted-average accumulated expenditures for the asset in 2015 and 2016.

c.       Weighted-average expenditures for the asset in 2016.

d.      Total expenditures for the asset in 2016.

4.      Colt Football Co. had a player contract with Watts that is recorded in its books at $8,400,000 on July 1, 2017. Day Football Co. had a player contract with Kurtz that is recorded in its books at $10,500,000 on July 1, 2017. On this date, Colt traded Watts to Day for Kurtz and paid a cash difference of $1,050,000. The fair value of the Kurtz contract was $12,600,000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in Colt’s books at

a.       $9,450,000

b.      $10,500,000

c.       $11,550,000

d.      $12,600,000

5.      Washington Co. exchanged nonmonetary assets with Stranger Co. No cash was exchanged and the exchange had no commercial substance. The carrying amount of the asset surrendered by Washington exceeded. Both the fair value of the asset received and Stranger’s carrying amount of that asset. Washington should recognize the difference between the carrying amount of the asset it surrendered and

a.       The fair value of the asset it received as a loss.

b.      The fair value of the asset it received as a gain.

c.       Stranger’s carrying amount of the asset it received as a loss.

d.      Stranger’s carrying amount of the asset it received as a gain.

6.      Charles County owned an idle parcel of real estate consisting of land and a factory building. Charles gave title to this realty to Parson Co. as an incentive for Parson to establish manufacturing operations in the county. Parson paid nothing for this realty, which had a fair value of $250,000 at the date of the grant. Parson should record this nonmonetary transaction as a

a.       Memo entry only

b.      Credit to Contribution Revenue for $250,000

c.       Credit to Comprehensive Income for $250,000

d.      Credit to Donated Capital for $250,000

7.      On September 10, 2015, Jenks Co. incurred the following costs for one of its printing presses:

Purchase of attachment                                                           $55,000

Installation of attachment                                                       $5,000

Replacement parts for renovation of press                             $18,000

Labor and overhead in connection with renovation of press   $7,000

     Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized?

a.       $0

b.      $67,000

c.       $78,000

d.      $85,000

8.      On February 2, 2016, Yarley Corp. replaced its boiler with a more efficient one. The following information was available on that date:

Purchase price of new boiler                                                   $150,000

Carrying amount of old boiler                                                $10,000

Fair value of old boiler                                                                $4,000        

Installation cost of new boiler                                                $20,000

The old boiler was sold for $4,000. What amount should Yarley capitalize as the cost of the new boiler?

a.       $170,000

b.      $164,000

c.       $160,000

d.      $150,000

Answer 1