Exam 10: Property, Plant, and Equipment: Acquisition and Disposal

Smith Delivery Services bought a truck by paying $44, 000 cash down and signing a $148, 000 non-interest-bearing note due in five years for the balance.Current interest rates were 8%.Actuarial information for five periods at 8% follows: Amount of 1 1.469 Present value of 1 0.680 Amount of annuity of 1 5.867 Present value of annuity of 1 3.993 Required: Compute the amount that should be charged to the asset account.

Under GAAP, which one of the following types of costs should not be capitalized?

Robards Services exchanged an asset with a cost of $24, 000 (now 40% depreciated)for a nonmonetary asset worth $12, 000.Robards received $2, 000 boot.In the entry to record this exchange, Robards should record

On August 1, Silver Company exchanged a machine for a similar machine owned by Wrangler Company and also received $7, 000 cash from Wrangler Company.Silver's machine had an original cost of $70, 000, accumulated depreciation to date of $34, 500, and a fair market value of $60, 000.Wrangler's machine had a book value of $45, 000 and a fair value of $53, 000. Required: Prepare the necessary journal entry by Silver Company to record this transaction assuming a. Siver will use the newly acquired machine in the same manner as the old one. b. Silver's use of the new machine will be substantially different from the old one.

On May 1, 2010, Argus Manufacturing Co.acquired a machine for $180, 000.The machine was depreciated monthly using the straight-line method with an estimated life of ten years and no salvage value.On December 1, 2017, the machine was sold for $40, 000. Required: Compute the amount of gain or loss on the sale of the machine, and prepare the journal entry to record the sale.(Calculate depreciation to the nearest whole month.)

The Rothchild Company purchased a machine on October 1, 2010, for $80, 000.At the time of acquisition, the machine was estimated to have a useful life of five years and an estimated salvage value of $5, 000.Rothchild has recorded monthly depreciation using the straight-line method.On April 1, 2012, the machine was sold for $50, 000.What should be the loss recognized from the sale of the machine?

On May 7, 2010, Rabie Corporation purchased for $450, 000 a tract of land on which was located a warehouse and an office building.The following data were collected concerning the property: Current Vendor's Assessed Original Valuation Cost Land \ 100,000 \ 70,000 Warehouse 80,000 80,000 Office building \4 00,000 \3 00,000 What are the appropriate amounts that Rabie should record for the land, warehouse, and office building, respectively?

Early in 2010, Roper, Inc.purchased certain plant assets under a deferred payment contract.The agreement was to pay $50, 000 at year-end for each of the next three years.The plant assets should be valued at

Ralph Company exchanged a machine for some land.The machine had cost $15, 000, was 70% depreciated, and could be sold for $4, 100.Calvin paid $600 in addition to giving up the machine. Required: a. Compute the amount at which the land should be recorded. b. Assume, instead, that Ralph exchanged the machine for a new, more efficient machine with a fair value of $\$ 4,700$ , while still paying $\$ 600$ as before. Compute the gain or loss that would be recorded on the sale of the old machine by Ralph

Exhibit 10-1 Two construction companies, Fargo and Rambam, are in the construction business.Each owns a tract of land being held for development, but each company believes that the other's land is better suited to enhance the success of each planned development.Accordingly, they agree to exchange their land and have the following information: Fargo's Rambam's Land Land Cost and book value \ 400,000 \ 250,000 Fair value based upon appraisal \ 500,000 \ 450,000 The exchange of land was made, and based on the difference in appraised fair value, Rambam paid $50, 000 cash to Fargo. - Refer to Exhibit 10-1.For financial reporting purposes, Rambam should recognize a gain on this exchange in the amount of

The Heavy Equipment Company decided to replace a gasoline engine with a diesel engine in one of its cranes.The new engine cost $8, 000, which Heavy paid in cash.The old engine is discarded at no cost to Heavy Equipment. Required:

Which is the best definition of start-up costs?

Rupert Company exchanged one business automobile for another business automobile.The old automobile had an original cost of $40, 000, an undepreciated cost of $16, 000, and a market value of $21, 000 when exchanged.In addition, Rupert paid $9, 000 cash for the replacement automobile.The list price of the replacement automobile was $35, 000.The replacement will help generate significantly greater cash flows in the business.At what amount should the replacement automobile be recorded for financial accounting purposes?

Rodriguez Company made the following payments related to a land acquisition: Purchase price \ 6,000 Past due taxes 500 Title search 150 Cost of razing old building 300 Interest (incurred after productive operations had begun) 160 Proceeds from salvage of old building 85 The recorded cost of the land should be

Rogaine Company exchanged inventory items that cost $47, 000 and normally sold for $65, 000 for a new delivery truck with a list price of $67, 000.The delivery truck should be recorded on Rogaine's books at

Which one of the following statements is true?

Rust, Inc.exchanged a truck that cost $30, 000 (now 50% depreciated)for equipment with an appraised value of $25, 000.Rust paid boot of $6, 000.Rust should record the equipment at

The president of Reindeer Corporation donated a building to Monday Corporation.The building had an original cost of $500, 000, a book value of $175, 000, and a fair market value of $250, 000.To record this donation, Monday will

Why is it important to allocate a lump-sum purchase amount among the individual assets acquired?

Describe the IFRS treatment of increases in the market value of property, plant, and equipment held during the year.Compare that treatment to U.S.GAAP requirements.