Exam 9: Property,Plant,and Equipment; Intangibles; and Goodwill

Legal costs and successful court defence with respect to internally generated patents may both be capitalized.

Asset A is owned by TC and has a book value at 12/31/2012 of $9,000.TC exchanged Asset A and $60,000 cash with CE for Asset B At 12/31/2013, the market value of Asset A is $20,000 and the list price of Asset B is $90,000.Assuming that these assets are dissimilar in nature, at what amount should Asset B be recorded by TC?

A machine was purchased for use in operations at a "marked" price of $8,750.Cash paid at purchase date was $2,000,the balance of the marked price was for a note payable "without interest" to the end of one year.The going rate of interest was 8 percent. Give the entry to record the purchase.

On January 1^st,2008,ABC Inc.purchased a copper mine for $400,000.The company is required by provincial law to restore the land on which the mine is located to its initial condition at the end of the mine's ten year useful life.Restoration costs are estimated to be $35,000.ABC is subject to an interest rate of 5%.Prepare the journal entries required on January 1^st and December 31^st,2008.Round all entries to the nearest dollar.

The amount of provincial sales tax paid on the purchase of machinery (a capital asset) should be debited to a:

Should the following fees associated with the registration of an internally developed patent be capitalized? Legal Registration Fees Fees 1 No No 2 No Yes 3 Yes No 4 Yes Yes

RST and XYZ exchanged non-monetary assets with no monetary consideration involved.The exchange did not culminate an earning process for either RST or XYZ.Both firms should value the asset received at:

RB purchased a machine on January 1,2014.The invoice price was $1,000,terms 1/10,n/31.Provincial sales tax on the invoice price was 4 percent.Other related cash payments by RB were: shipping,$75,and installation,$100.The invoice was paid on January 23,2014.The machine account should be debited for:

The cost of self-constructed assets includes a reasonable allowance for overhead specific to the construction,and this overhead should be applied at a rate approximating practical capacity.

WC purchased an asset that had a list price of $25,000 and a cash price of $22,500.WC paid for this asset by paying $3,750 cash and trading in an old asset that originally cost $37,500 (accumulated amortization to date,$19,000).The two assets are dissimilar.WC should recognize a gain or loss of:

MD owns a tract of land,which it purchased in 2010 for $100,000.The land is held as a future plant site and has a fair market value of $140,000 on July 1,2013.HC also owns a tract of land held as a future plant site.HC paid $180,000 for the land in 2011 and the land has a fair market value of $200,000 on July 1,2013.On this date,MD exchanged its land and paid $50,000 cash for the land owned by HC.At what amount should MD record the land acquired in the exchange?

When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant,the costs incurred to tear down the building should be:

During 2013,RB incurred the following expenditures (cash) on its office building.For each item,give the required entry (entries). (A) Normal,recurring,maintenance and repairs,$1,250. (B) Unusual,high cost repairs,$22,000,which added additional value to the property. (C) Replaced the original freight elevator in the building with a new elevator that cost $45,000 (cash).The old elevator (original cost,$16,500,accumulated amortization,$12,500) was sold for $4,750.

On January 1,2013,LR purchased a 1,000 acre ranch.The asking price was $1,300,000.Approximately 10 percent of the total value of the ranch was allocable to ranch improvements.Payment in full was made as follows: Cash,$371,930,10,000 shares LR common shares (market $25 per share based on several recent large market exchanges) and a $500,000 non-interest-bearing note payable in full on December 31,2014 (going interest rate,15 percent).Give the journal entry for LR to record this purchase (rounded).

A patent should be amortized over its legal life,or useful life,whichever is shorter,but the term should not exceed 20 years.

Assets received in donation should:

Research expenditures are usually expensed while development expenditures may be capitalized if certain conditions are met.

A machine was purchased at an invoice price of $30,000,subject to a 2 percent cash discount if paid within 10 days.Installation of the machine cost $500.Costs incurred in testing the machine were $80 for the operator's time and $150 for materials.The discount was lost because of late payment of the invoice.Provincial sales tax on invoice price,4 percent,and amortization during the testing period was $200.The cost that should be recorded for the machine is:

XYZ purchased a plant,including land,building,and machinery,for $110,000.These items were carried on the books of the seller as follows: land,$30,000; building,$80,000,and machinery,$40,000.Immediately after the purchase,the assets were appraised at the following values: land,$24,000; building,$30,000,and machinery,$66,000.What cost should XYZ record for the land,building and machinery? Land Building Machinery 1 \ 22,000 \ 27,500 \ 60,500 2 \ 36,666 \ 36,667 \ 36,667 3 \ 30,000 \ 80,000 \ 40,000 4 \ 22,000 \ 58,667 \ 29,333

The excess of the cost of self-constructed assets over their cost if they had been purchased from outsiders should be recorded as an expense or loss of the period; similarly,costs of self-constructed assets which result in a cost savings should result in revenue or gain recognition.