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

At the end of the year, any balance in Allowance for Repairs should be

Which of the following costs incurred subsequent to the acquisition of a machine would be appropriately accounted for by debiting the accumulated depreciation account related to the machine?

Renault Marina exchanged a boat with a cost of $80, 000 (now 75% depreciated)for another boat with a current fair value of $27, 000.No boot was paid or received.The new boat will perform the exact same function as the old boat.Renault should record the new boat at

Cooper, Inc.is constructing a building that qualifies for interest capitalization.The following information is available: Capitalization period: January 1, 2010-December 31, 2011 Expenditures on project (incurred evenly): 2010 \ 20,000 2011 \ 60,000 Amounts borrowed and outstanding (all debt incurred January 1, 2010): \ 10,000 at 10\% (specifically for the construction project) \ 18,000 at 12\% (general debt) \ 30,000 at 14\% (general debt) Required: a. Compute the amount of interest that should be capitalized in 2010 and 2011 . (Round interest rates to the ne arest hundredths e.g., $07.62 \%$ .) b. Assume that in 2010 umused borowed funds were invested and eaned interest revemue amounting to $\$ 600$ . How much interest should be capitalized to the asset account in 2011 ?

According to GAAP, interest must be capitalized for

In 2010, Hart Co.invested $4, 000, 000 in oil well exploration activities.Seventy percent of the drilling was successful and resulted in commercial quantities of oil being found. Required: a. Inchcate the amount of driling expense Hart Co. would recognize in 2010 if the fill-cost method is in use. b. Indicate the cost that would be reponted on the balance sheet as oil and gas properties if the successful-efforts method is in use.

Remy purchases a new machine by issuing an $18, 000 three-year note.The company will pay off the obligation by paying $6, 000 at the end of each year.The market rate for obligations of this type is 8%.The present value of an annuity at 8% for three periods is 2.577097.The machine will be recorded at a cost of

Costs that are incurred after acquiring a piece of property, plant, or equipment are for a variety of reasons, ranging from routine repairs to major overhauls and improvements.The accountant's problem is to determine how these costs should be recorded. Required: Identify the two categories of expenditures in which these costs can be classified, and explain how the accountant determines which classification is appropriate.