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

A new machine was acquired by JR that had a quoted price of $6,000.JR paid $1,500 cash and transferred 100 shares common shares (current market value,$40 per share,based on several recent large trading transactions.).Other payments related to the acquisition were: transportation,$150; provincial sales tax,$50,and installation costs,$200.The asset account should be debited for $___________________.

Under ASPE,both legal and constructive decommissioning liabilities are recognized on the financial statements.

AB recently purchased an old building and the land on which it is located.The old building will be demolished at a net cost of $10,000.A new building will be built on the site.The demolition cost should be:

Firm B (buyer) agreed to buy all the outstanding common shares of firm S (seller).Relevant data for S at the time of the purchase: Total owners' equity \ 10,000 Total market value of identifiable assets 50,000 Total market value of liabilities 20,000 Average earnings per year 20,000 The average rate of return for S's industry is 30%,based on net assets.B demands a 10% return on its investment,but allows the average rate of return to be applied to S's market value of net assets for purposes of computing goodwill.Any earnings in excess of the industry average are considered to extend for 5 years after purchase.How much did B pay for S's shares if the two parties agree to value goodwill at the present value of excess earnings over the industry average?

An identifiable intangible asset developed internally is never recognized in the accounts as an asset.

CAC acquired a gym in exchange for two $200,000 bonds.The bonds pay 12 percent annual interest and mature at the end of 10 years.They have no determinable market value.The going rate of interest on liabilities with this level of risk is 16 percent.CAC should record the cost of the gymnasium at:

An old machine with a book value of $30,000 was traded in on a new similar machine.The new machine,which had a cash price of $120,000,was purchased for $56,000 cash plus the old machine.The cost of the new machine will be $80,000.

Which of the following costs generally would be capitalized to a property,plant and equipment account?

On January 1^st,2013,PC Inc.disposed off an old elevator for $10,000.The elevator had a carrying value $20,000 (Cost: $100,000,Accumulated Amortization: $80,000).The gain or loss from this sale was:

At the end of the annual reporting period,December 31,2013,LTX had the accounting situations given below under consideration for adjusting entries.Give the appropriate adjusting entry for each situation.Assume straight-line amortization in all cases.If an adjusting entry is not needed,explain why. Situation A-A patent that cost $51,000 has been amortized for six years on the basis of a 17-year life.Now,it is estimated that the total life should have been estimated at 12 years. Situation B-The balance in the prepaid insurance account on January 1,2013,was $4,000.On June 1,2013,a new 3-year insurance premium of $36,000 was paid because the old policy expired.The new premium was recorded in the Prepaid Insurance Account (current asset).

A corporation which incurs costs in defending a patent in an infringement suit should:

CK exchanged Truck A with SD for Truck B; SD paid cash to CK of $9,600.Assume that the following data relate to the transaction: Carrying value of Truck A to JB.. \8 ,000 Carrying Value of Truck B to SD. 3,600 Fair market value of Truck B (per "blue book"). 2,400 (A) CK should account for this transaction (assume similar assets) as a: A.100% exchange. B.1/5 sale,4/5 exchange. C.100% Sale. D.4/5 sale,1/5 exchange. (B) Give the entry to record the exchange in the accounts of CK. (C) Give the entry to record the exchange in the accounts of SD.

CT has been using the "expense as incurred" approach in recording ordinary repairs.For 2013,CT decided to use the allocation approach on an annual basis.Estimated expenditures for ordinary repairs for the year 2013 were $6,000.Actual cash expenditures for ordinary repairs for January 2013 were $550.Give the indicated journal entries for January 2013.

(Appendix 1) ABC Inc.purchased a shopping complex and with it,a large condominium complex attached to it in the amount of $20,000,000 on January 1,2013.Both complexes are designated investment property.Both facilities are estimated to have a useful life of eighteen years and a salvage value of $2 million dollars.On December 31^st,2013,the fair value of both complexes was $25 million.ABC Inc.prepares its financial statements under IFRS.Assuming that ABC uses the Fair Value Model to account for the complex,the carrying value of both complexes on December 31^st,2013 would be:

EC exchanged an old widget-making machine (Model A) that originally cost $46,000 (accumulated amortization,$37,400) plus $10,000 cash for an improved widget-making machine (model B) owned by IC.IC originally acquired the Model B machine for $77,000 (accumulated amortization to date,$42,000).EC's machine has a current market value of $5,000 and IC's has a current market value of $20,000.These are similar assets.EC should record the cost of the Model B widget-making machine acquired at:

From the following transaction information for PANTS-PRESSO Inc.for the current year,determine the ending balances for all property,plant and equipment accounts (including construction in progress).Show how you arrived at your answer for each.Ignore amortization,assume there were no beginning balances,and there is no need to show subsidiary accounts or include discussion. Acquired new equipment,paid $50,000 down,and signed a 5%,$200,000 note payable.Both the principal and one-year's interest is due one year from the date of purchase.The cost to install the equipment was $4,000; the cost to test it before placing it on-line was $2,000. PANTS-PRESSO spent $20,000 to train employees on the above new equipment. Materials,labour and overhead amounted to $400,000 for the construction of a building started and completed in the current year.The building was worth $600,000 at completion and will house the office operations for the company.Total interest cost recognized during the year was $50,000; $35,000 of that amount qualifies to be capitalized to this building.The land on which the building was constructed cost $100,000,also purchased this year. A second tract of land was acquired as a building site,for $45,000.A second building on this land also was started during the year but not completed.$5,000 was spent for surveying this second land parcel; $30,000 was spent to excavate the foundation of the building; and $8,000 was spent to clear oak trees on the property. PANTS-PRESSO was assessed $12,000 by the county for sewers and other infrastructure costs for the site of the completed building.

Computer software is always accounted for as a finite-lived intangible.

RC owned Asset X,which was reflected in the accounts as follows: Cost,$120,000; accumulated amortization,$80,000.Its market value was estimated to be $84,000.RC acquired Asset Y (a similar asset) which had a firm cash price of $60,000,by trading in asset X in full payment,and RC received cash of $2,000. Give the entry for RC to record the above transaction.

Choose the correct statement about a restriction placed on the donation of equipment to a firm.

The cost of rearranging capital assets in a factory to attain greater efficiency in operations should be recorded as an expense in the period of rearrangement.