Exam 10: Acquisition and Disposition of Property, Plant, and Equipment

Tyson Chandler Company purchased equipment for $10,000.Sales tax on the purchase was $500.Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225.What is the cost of the equipment?

Plant assets purchased on long-term credit contracts should be accounted for at

On May 1, 2007, Royster Company began construction of a building.Expenditures of $120,000 were incurred monthly for 5 months beginning on May 1.The building was completed and ready for occupancy on September 1, 2007.For the purpose of determining the amount of interest cost to be capitalized, the average accumulated expenditures on the building during 2007 were

Use the following information for questions Seiler Co.purchased land as a factory site for $600,000.Seiler paid $60,000 to tear down two buildings on the land.Salvage was sold for $5,400.Legal fees of $3,480 were paid for title investigation and making the purchase.Architect's fees were $31,200.Title insurance cost $2,400, and liability insurance during construction cost $2,600.Excavation cost $10,440.The contractor was paid $2,200,000.An assessment made by the city for pavement was $6,400.Interest costs during construction were $170,000. -The cost of the building that should be recorded by Seiler Co.is

The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were

Use the following information for questions On March 1, 2007, Dennis Company purchased land for an office site by paying $540,000 cash.Dennis began construction on the office building on March 1.The following expenditures were incurred for construction: Date Expenditures March 1,2007 \ 360,000 April 1,2007 504,000 May 1, 2007 900,000 June 1,2007 1,440,000 The office was completed and ready for occupancy on July 1.To help pay for construction, $720,000 was borrowed on March 1, 2007 on a 9%, 3-year note payable.Other than the construction note, the only debt outstanding during 2007 was a $300,000, 12%, 6-year note payable dated January 1, 2007. -Assume the weighted-average accumulated expenditures for the construction project are $870,000.The amount of interest cost to be capitalized during 2007 is

Gray Football Co.had a player contract with Vance that is recorded in its books at $3,600,000 on July 1, 2007.Day Football Co.had a player contract with Simms that is recorded in its books at $4,500,000 on July 1, 2007.On this date, Gray traded Vance to Day for Simms and paid a cash difference of $450,000.The fair value of the Simms contract was $5,400,000 on the exchange date.The exchange had no commercial substance.After the exchange, the Simms contract should be recorded in Gray's books at

Improvements are often referred to as betterments and involve the substitution of a better asset for the one currently used.

If a nonmonetary exchange lacks commercial substance, and cash is received, a partial gain or loss is recognized.

When funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the excess funds not needed to pay for construction may be temporarily invested in interest-bearing securities.Interest earned on these temporary investments should be

Ben Gordon Corporation constructed a building at a cost of $10,000,000.Average accumulated expenditures were $4,000,000, actual interest was $600,000, and avoidable interest was $300,000.If the salvage value is $800,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is

During self-construction of an asset by Mitchellson Company, the following were among the costs incurred: Fixed overhead for the year \ 1,000,000 Portion of \ 1,000,000 fixed overhead that would be allocated to asset if it were normal production 60,000 Variable overhead attributable to self-construction 55,000 What amount of overhead should be included in the cost of the self-constructed asset?

On March 1, Bakken Co.began construction of a small building.Payments of $180,000 were made monthly for four months beginning March 1.The building was completed and ready for occupancy on June 1.In determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures are

The cost of land does not include

On December 1, 2007, Logan Co.purchased a tract of land as a factory site for $800,000.The old building on the property was razed, and salvaged materials resulting from demolition were sold.Additional costs incurred and salvage proceeds realized during December 2007 were as follows: Cost to raze old building \ 70,000 Legal fees for purchase contract and to record ownership 10,000 Title guarantee insurance 16,000 Proceeds from sale of salvaged materials 8,000 In Logan 's December 31, 2007 balance sheet, what amount should be reported as land?

Which of the following is not a condition that must be satisfied before interest capitalization can begin on a qualifying asset?

Construction of a qualifying asset is started on April 1 and finished on December 1.The fraction used to multiply an expenditure made on April 1 to find weighted-average accumulated expenditures is

Which of the following statements is true regarding capitalization of interest?

Which of the following is not a major characteristic of a plant asset?

Use the following information for questions Two independent companies, Mintz Co.and Pine Co., are in the home building business.Each owns a tract of land held for development, but each would prefer to build on the other's land.They agree to exchange their land.An appraiser was hired, and from her report and the companies' records, the following information was obtained: Mintz's Land Pine's Land Cost and book value \ 192,000 \ 120,000 Fair value based upon appraisal 240,000 210,000 The exchange was made, and based on the difference in appraised fair values, Pine paid $30,000 to Mintz.The exchange lacked commercial substance. -The new land should be recorded on Mintz's books at