Exam 10: Investments in Noncurrent Operating Assets-Acquisition

Place Company started construction of a new office building on January 1,2014,and moved into the finished building on July 1,2015.Of the building's $5,000,000 total cost,$4,000,000 was incurred in 2014 evenly throughout the year.Place's incremental borrowing rate was 12 percent throughout 2014,and the total amount of interest incurred by Place during 2014 was $204,000.What amount should Place report as capitalized interest at December 31,2014?

The Maker Company exchanged 25,000 shares of its own $50 par value common stock for a turret lathe from Turner Company.The market value of the Maker Company stock was $68 per share at the date of exchange.The equipment had a carrying value of $1,625,000. Record the exchange on the books of Maker Company in general journal form.

On January 1,2014,Mercury Airlines contracted with Dover Aircraft to construct an aircraft to Mercury's specifications at a cost of $2,000,000.During 2014,Mercury paid Dover $400,000 on January 1,and another $250,000 on September 30.On January 1,Mercury borrowed $360,000 at 13% to partially finance the construction,an obligation still outstanding at the end of 2014.The remaining amount paid to Dover was financed from available working capital.Mercury has approximately $1,600,000 of additional debt outstanding at an average interest cost of 12%. Required: What is the total capitalized cost of the aircraft under construction at the end of 2014?

Acquired in-process research and development should be

A copyright is an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

Which of the following is true regarding the traditional approach to estimating the fair value of an intangible asset?

On May 1,2014,Abiuso Corporation purchased for $790,000 a tract of land on which a warehouse and office building were located.The following data were collected concerning the property: Determine the appropriate amounts that Abiuso should record for the land,warehouse,and office building.

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

Which of the following concepts is often given as justification not to value noncurrent operating assets at their current values?

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?

Foodmark,Inc.,is a large food-marketing company.Footnote information from the company's 2014 annual report appears below.Independent retailers use funds loaned by Foodmark to finance the acquisition of property used in retail food operations.Foodmark records these loans in its long-term notes receivable account.The net balance of the long-term notes receivable account at the end of 2014 is (in thousands of dollars)$36,731.The following information is available from the company's footnotes: The life of the notes range from 1 to 10 years,with the average being 6 years,and may be non-interest bearing or bear interest at rates ranging primarily from 5 to 12 percent. Assume the following for purposes of this case: a.The notes receivable account is comprised of one 8-year, 10 percent note with seven years remaining in its term at the end of 2014. b.Foodmark financed 100 percent of the asset acquisitions for the retailer. c.Annual payments on the note are received at the end of each year, include principal and interest, and are a constant amount each year.Required:Determine the market value of the assets financed by Foodmark at the date of acquisition by the retailer (debtor).

The Final Word 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: 1.The roads on all sides of the land will be graded and paved. 2.Street lights will be installed. 3.Sewer and drainage systems will be installed. 4.Several private roads will be constructed on the property. 5.Sidewalks will be constructed to connect the various buildings. 6.Parking lots will be constructed at selected places on the property for employee and customer parking. 7.The property will be suitably landscaped. Required: Explain how each of the above items would be accounted for in the records of Final Word Company.

During 2014,Robby,Inc.incurred the following costs: In its income statement for the year ended December 31,2014,Robby should report research and development expense of

Allure Company made the following cash expenditures during the year: (a)Paid $100,000 for interest capitalized as part of a self-construction project. (b)Paid $225,000 for interest that was expensed during the year. (c)Paid $300,000 for R&D expenditures that were immediately expensed. (d)Paid $400,000 to acquire new machinery. Indicate where in the statement of cash flows each of the preceding items would be reflected.Allure uses the indirect method of reporting cash flow from operations.

Dan Company recently acquired two items of equipment.The transactions are described below: June 10: Acquired a press at an invoice price of $6,500,subject to a 2% cash discount which was taken.Costs of freight and insurance during shipment were $205.Installation costs were $350. November 12: Acquired a welding machine at an invoice price of $4,000,subject to a 4% cash discount which was NOT taken.Additional welding supplies were acquired at a total cost of $300. The increase in the equipment account as a result of the above transactions would be

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

The Morris Corporation acquired land,buildings,and equipment from a bankrupt company at a lump-sum price of $180,000.At the time of acquisition,Morris paid $12,000 to have the assets appraised.The appraisal disclosed the following values: What cost should be assigned to the land,buildings,and equipment,respectively?

On December 1,2014,Gomer 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 Gomer at a cost of $40 per share.Gomer's common stock had a fair market value of $50 per share on December 1,2014.Gomer received $10,000 for scrap when an existing structure was removed from the site. Required: 1.Determine the appropriate cost of the land acquired. 2.Provide general guidelines for determining the amount to be recorded as the historical cost for assets acquired by the issuance of securities.

Bluesy Company purchased land with a current market value of $240,000.Its book value in the accounts of the seller was $130,500.In exchange for the land,Bluesy issued 20,000 shares of its common stock,par $10,with an estimated market value of $14 per share.Bluesy stock is not traded on an established stock exchange.What amount should Bluesy record as the cost of the land?

A trademark is an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?