Exam 10: Property, Plant, and Equipment: Acquisition and Subsequent Investments

How can the future economic benefit of a capital expenditure be increased?

Mary Co. exchanged a piece of equipment that had cost $40,000 (now 75% depreciated) for a truck with a current appraised value of $18,000. Mary Co. gave the other company the piece of equipment and $10,000. Mary Co. should record

Exhibit 10-1 Two construction companies, Dakota and Carolina, 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: The exchange of land was made, and based on the difference in appraised fair value, Carolina paid $50,000 cash to Dakota. -Refer to Exhibit 10-1. After the exchange, Dakota should record its newly acquired land on its books at

Property, plant, and equipment are listed on the balance sheet at

Minor Corp. has agreed to expand its operations by opening a manufacturing plant in Bel Air, Maryland. In return, Bel Air will donate an abandoned building and the 5 acres on which it sits to Minor. The land originally cost $1,000,000 and the building $3,000,000. The building's current book value is $380,000, and current appraisals are: land $8,000,000 and building $3,600,000. Minor has also agreed to provide 100 jobs for the next 5 years to Bel Airs' city residents. Minor estimates that the wages to these residents will amount to $4,000,000. Required: Prepare the journal entry to record this acquisition on Minor's books.

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

Two alternative methods of accounting for the cost of oil and gas properties have been widely used. The method that capitalizes all costs associated with all wells is the

Laramy purchases a new machine by issuing an $21,000 three-year note. The company will pay off the obligation by paying $7,000 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

Early in 2014, Samos, Inc. purchased certain plant assets under a deferred payment contract. The agreement was to pay $75,000 at year-end for each of the next three years. The plant assets should be valued at

During 2014, the Tidel Company completed the following transactions related to its property, plant, and equipment accounts: a.On March 18, Tidel paid $480,000 for land, buildings, and equipment in a lump-sum purchase. An appraisal that cost Tidel $10,000 revealed fair market values of $200,000 for the land, $150,000 for the buildings, and $150,000 for the equipment. b.On August 11, Tidel issued 20,000 shares of its $10 par value common stock in exchange for some equipment. The equipment's fair market value is estimated at $360,000 by an outside appraisal. On the date of the exchange, the stock was being actively traded at $17 per share on a major stock exchange. Required: Prepare the necessary journal entry to properly record each transaction.

Romney 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 $24,000 when exchanged. In addition, Romney paid $9,000 cash for the replacement automobile. The list price of the replacement automobile was $45,000. 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?

All of the following would be classified as property, plant, and equipment except

Bob's Excavating purchased some equipment by issuing a three-year 6% note for $8,000 when the market rate for an obligation of this nature was 8%. The interest is payable annually. Actuarial information for three periods follows: At the date of purchase, what amount should be debited to Equipment?

On August 1, 2014, Robertson traded in an old plant asset for a newer model that would be more productive and efficient. Data relative to the old and new plant assets follow: A total of $10,500 cash was given in the trade. What should be the cost of the new plant asset for financial accounting purposes?

On May 15, 2015, January Company acquired a new forklift in exchange for an old forklift that it had acquired in 2005. The old forklift was purchased for $20,000 and had a book value of $5,000. On the date of the exchange, the old forklift had a market value of $6,000. In addition, Retread paid $18,000 cash for the new forklift, which had a list price of $25,000. it is expected that future cash flows will not change. At what amount should Retread record the new forklift for financial accounting purposes?

An asset classified as property, plant, and equipment on the balance sheet must have which one of the following characteristics?

What three characteristics must an asset have in order for it to be classified as property, plant and equipment?

What are several advantages of recording property, plant, and equipment at historical cost?

Wilhelm Company exchanged a piece of equipment with a cost of $300,000 and accumulated depreciation of $240,000 for land owned by James Corporation. No cash was exchanged. Jame's land had an original cost of $190,000. At the date of exchange, both assets had a fair market value of $180,000. Required: Prepare the journal entry that each company should record.

Costs incurred by Mills Company that relate to its property, plant, and equipment assets might be recorded in one of the five following classes of accounts: a.an expense account b.an accumulated depreciation account c.a land account d.a building account e.an equipment account Required: For each of the costs identified below, indicate the type of account in which the cost should be recorded by placing the appropriate letter in the space provided.