Exam 10: Property, Plant, and Equipment and Intangible Assets: Acquisition

When one company acquires another company, any acquired "in-process research and development" is recorded as:

A company receiving a donated asset will record:

Grab Manufacturing Co. purchased a 10-ton draw press at a cost of $180,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the 10-ton draw press is:

Amortization of capitalized computer software costs is:

Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,000,000. The building included used but functional equipment. According to independent appraisals, the fair values were $4,500,000, $3,000,000, and $2,500,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be:

A company incurred the follow costs related to research and development for the current year: The equipment will be used in other projects. Depreciation in the current year is $90,000. For what amount should the company report research and development expense?

Mad Hatter Enterprises purchased new equipment for $365,000, terms f.o.b. shipping point. Other costs connected with the purchase were as follows: State sales tax 29,200 Freight costs 5,600 Insurance while in transit 800 Insurance after equipment placed in service 1,200 Installation costs 2,000 Insurance for the first year of operations 2,400 Testing 700 Required: Determine the capitalized cost of the equipment.

On August 1, 2018, Reliable Software began developing a software program to allow individuals to customize their investment portfolios. Technological feasibility was established on January 31, 2019, and the program was available for release on March 31, 2019. Development costs were incurred as follows: August 1 through December 31,2018 \ 6,300,000 January 1 through January 31,2019 1,200,000 February 1 through March 31,2019 1,600,000 Reliable expects a useful life of five years for the software and total revenues of $8,000,000 during that time. During 2019, revenue of $2,000,000 was recognized. Required: 1. Prepare the journal entries to record the development costs in 2018 and 2019. 2. Calculate the required amortization for 2019.

Average accumulated expenditures:

Bloomington Inc. exchanged land for equipment and $3,000 in cash. The book value and the fair value of the land were $104,000 and $90,000, respectively. Assuming that the exchange has commercial substance, Bloomington would record equipment and a gain/(loss) of:

In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if:

Walker Corporation exchanged land and $4,500 cash for material handling equipment. The land had a book value of $45,000 and a fair value of $58,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.

On January 1, 2018, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2019. Expenditures on the project were as follows: January 1,2018 \ 200,000 September 1,2018 \ 300,000 December 31,2018 \ 300,000 March 31,2019 \ 300,000 September 30,2019 \ 200,000 Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2018. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2018 and 2019. Average accumulated expenditures for 2018 was:

Goodwill is:

Kerry, Inc., exchanged land and cash of $8,000 for equipment. The land had a book value of $55,000 and a fair value of $60,000. Required: Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

On March 1, 2018, Shipley Resources entered into an agreement with the state of Alaska to obtain the rights to operate a mineral mine for $6 million. The mine is expected to produce 100,000 tons of mineral. As part of the agreement, Shipley agrees to restore the land to its original condition after mining operations are completed in approximately five years. Management has provided the following possible outflows for the restoration costs that will occur five years from now: Cash Outflow Probability \ 300,000 2\% 400,000 50\% 500,000 25\% Shipley's credit-adjusted risk-free interest rate is 10%. During 2018, Shipley extracted 18,000 tons of ore from the mine. How much accretion expense will the company record in its income statement for the 2018 fiscal year?

Rockport Refinery acquired all the outstanding common stock of Stellman Corporation for $68,000 in cash. The book values and fair values of Stellman's assets and liabilities were as follows: Book Value Fair Value Current assets \ 24,000 \ 30,000 Property, plant, and equipment 44,000 56,000 Other assets 4,000 6,000 Current liabilities 16,000 16,000 Long-term liabilities 24,000 22,000 Required: Calculate the amount Rockport would record for goodwill.

Why are software development costs treated differently than other types of R&D?

An exclusive 20-year right to manufacture a product or use a process is a:

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950,000 cash. Lake assumed all of the liabilities of Huron. Book values and fair values of acquired assets and liabilities were: Book Value Fair Value Current assets (net) \ 130,000 \ 125,000 Property, plant, equip. (net) 600,000 750,000 Liabilities 150,000 175,000 Lake would record goodwill of: