FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Property, Plant, and Equipment and Intangible Assets: Acquisition

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

On March 1, 2018, Shipley Resources entered into an agreement with the state of Alaska to obtain the rights to operate a mineral mine for $6 million. The mine is expected to produce 100,000 tons of mineral. As part of the agreement, Shipley agrees to restore the land to its original condition after mining operations are completed in approximately five years. Management has provided the following possible outflows for the restoration costs that will occur five years from now: $\begin{array} { c c } \text { Cash Outflow } & \text { Probability } \\\$ 300,000 & 2 \% \\400,000 & 50 \% \\500,000 & 25 \%\\\end{array}$ Shipley's credit-adjusted risk-free interest rate is 10%. During 2018, Shipley extracted 18,000 tons of ore from the mine. How much accretion expense will the company record in its income statement for the 2018 fiscal year?

A) $30,326.
B) $20,697.
C) $24,837.
D) $27,294.

Correct Answer

verified

Show Answer

Question 72

Essay

Review LaterAdd Note

Review Later

On August 1, 2018, Reliable Software began developing a software program to allow individuals to customize their investment portfolios. Technological feasibility was established on January 31, 2019, and the program was available for release on March 31, 2019. Development costs were incurred as follows: $\begin{array}{lr}\text { August } 1 \text { through December } 31,2018 & \$ 6,300,000 \\\text { January } 1 \text { through January } 31,2019 & 1,200,000 \\\text { February } 1 \text { through March } 31,2019 & 1,600,000\end{array}$ Reliable expects a useful life of five years for the software and total revenues of $8,000,000 during that time. During 2019, revenue of $2,000,000 was recognized. Required: 1. Prepare the journal entries to record the development costs in 2018 and 2019. 2. Calculate the required amortization for 2019.

Correct Answer

verified

1.
2018:
Research and development expens...

View Answer

Show Answer

Question 73

Essay

Review LaterAdd Note

Mad Hatter Enterprises purchased new equipment for $365,000, terms f.o.b. shipping point. Other costs connected with the purchase were as follows: $\begin{array} { l r } \text { State sales tax } & 29,200 \\\text { Freight costs } & 5,600 \\\text { Insurance while in transit } & 800 \\\text { Insurance after equipment placed in service } & 1,200 \\\text { Installation costs } & 2,000 \\\text { Insurance for the first year of operations } & 2,400 \\\text { Testing } & 700\end{array}$ Required: Determine the capitalized cost of the equipment.

Amortization of capitalized computer software costs is:

A company receiving a donated asset will record:

Kerry, Inc., exchanged land and cash of $8,000 for equipment. The land had a book value of $55,000 and a fair value of $60,000. Required: Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

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: $\begin{array}{lrr} & \text { Book Value } & \text { Fair Value } \\\text { Current assets (net) } & \$ 130,000 & \$ 125,000 \\\text { Property, plant, equip. (net) } & 600,000 & 750,000 \\\text { Liabilities } & 150,000& 175,000\end{array}$ Lake would record goodwill of:

Average accumulated expenditures:

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

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

Walker Corporation exchanged land and $4,500 cash for material handling equipment. The land had a book value of $45,000 and a fair value of $58,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.

When one company acquires another company, any acquired "in-process research and development" is recorded as:

Rockport Refinery acquired all the outstanding common stock of Stellman Corporation for $68,000 in cash. The book values and fair values of Stellman's assets and liabilities were as follows: $\begin{array} { | l | r | r | } \hline & \text { Book Value } & \text { Fair Value } \\\hline \text { Current assets } & \$ 24,000 & \$ 30,000 \\\hline \text { Property, plant, and equipment } & 44,000 & 56,000 \\\hline \text { Other assets } & 4,000 & 6,000 \\\hline \text { Current liabilities } & 16,000 & 16,000 \\\hline \text { Long-term liabilities } & 24,000 & 22,000 \\\hline\end{array}$ Required: Calculate the amount Rockport would record for goodwill.

Bloomington Inc. exchanged land for equipment and $3,000 in cash. The book value and the fair value of the land were $104,000 and $90,000, respectively. Assuming that the exchange has commercial substance, Bloomington would record equipment and a gain/(loss) of:

Goodwill is:

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:

An exclusive 20-year right to manufacture a product or use a process is a:

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:

On January 1, 2018, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: $\begin{array}{lc}\text { January } 1,2018 & \$ 200,000 \\\text { September } 1,2018 & \$ 300,000 \\\text { December } 31,2018 & \$ 300,000 \\\text { March } 31,2019 & \$ 300,000 \\\text { September } 30,2019 & \$ 200,000\end{array}$ Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2018. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2018 and 2019. Average accumulated expenditures for 2018 was:

A company incurred the follow costs related to research and development for the current year: The equipment will be used in other projects. Depreciation in the current year is $90,000. For what amount should the company report research and development expense?