Exam 10: Investments in Noncurrent Operating Assets-Acquisition

On December 1, 2011, Pyle Corporation exchanged 5,000 shares of its $25 par value common stock held in treasury for a parcel of land to be held for a future plant site. The treasury shares were acquired by Pyle at a cost of $40 per share. Pyle's common stock had a fair market value of $50 per share on December 1, 2011. Pyle received $10,000 for scrap when an existing structure was removed from the site. Required:

According to the most current FASB standards, intangible assets acquired in a basket purchase which represents the acquisition of an entire business should be

During 2011, Krieger, Inc. incurred the following costs: In its income statement for the year ended December 31, 2011, Krieger should report research and development expense of

Which of the following principles best describes the current method of accounting for research and development costs?

In a "basket" or "lump-sum" purchase of assets, which of the following best describes the process by which the historical cost of the various assets acquired should be determined?

Assets constructed for a firm's own use present the problem of whether to capitalize interest on the funds invested during the time required to prepare the assets for their intended use. Current generally accepted accounting principles as specified by the FASB in Statement No. 34 require the capitalization of interest on borrowed capital, but not to exceed the total interest paid by the firm. Evaluate the appropriateness of the approach currently required in the professional pronouncements now in effect.

Donated equipment for which the fair value has been determined should be recorded as a debit to the appropriate equipment account and a credit to

An asset is being constructed for an enterprise's own use. The asset has been financed with a specific new borrowing. The interest cost incurred during the construction period as a result of expenditures for the asset is

The cost of a building to be used in the operations of a business should usually include all of the following except

A machine with an original estimated useful life of ten years is moved to another location in the factory after it had been in service for three years. The efficiency of the machine is increased for its remaining useful life. The reinstallation costs should be capitalized if the remaining useful life of the machine is

Peyton Company started construction of a new office building on January 1, 2011, and moved into the finished building on July 1, 2012. Of the building's $5,000,000 total cost, $4,000,000 was incurred in 2011 evenly throughout the year. Peyton's incremental borrowing rate was 12 percent throughout 2011, and the total amount of interest incurred by Peyton during 2011 was $204,000. What amount should Peyton report as capitalized interest at December 31, 2011?

A company made the following cash expenditures on a self-constructed building begun January 1 of the current year: The building is still under construction at year-end. What is the amount of the average accumulated expenditures for the purpose of capitalizing interest?

When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be

Which of the following is correct?

A company purchased land to be used as the site for the construction of a plant. Timber was cut from the building site so that construction of the plant could begin. The proceeds from the sale of the timber should be

On June 30, 2011, Hi-Tech Inc. purchased for cash at $50 per share all 150,000 shares of outstanding common stock of Skicraft Company. Skicraft's balance sheet at June 30, 2011, showed net assets with a book value of $6,000,000. The fair value of Skicraft's property, plant, and equipment on June 30, 2011, was $800,000 in excess of its book value. What amount, if any, will be recorded by Hi-Tech as goodwill on the date of purchase?

Peterson, Inc. purchased a machine under a deferred payment contract on December 31, 2010. Under the terms of the contract, Peterson is required to make eight annual payments of $140,000 each beginning December 31, 2011. The appropriate interest rate is 8 percent. The purchase price of the machine is

Which of the following is true regarding International Accounting Standard No. 23 (IAS 23), "Borrowing Costs," and FASB Statement of Financial Accounting Standards No. 34 (SFAS No. 34), "Capitalization of Interest Cost"?

According to SFAS No. 34, "Capitalization of Interest Cost," interest should be capitalized for assets that are

The Letter Perfect Company produces word processing software. The company recently purchased a large tract of land on which will be constructed several buildings to house the production and administrative personnel of the company. The following improvements are expected to be made to the land as part of the construction of the complex: Required: Explain how each of the above items would be accounted for in the records of Letter Perfect Company.