Exam 9: Long-Lived Assets

A firm acquired used equipment on January 1^st, 2014 by issuing a note calling for four equal payments to be made each December 31 starting in 2014. The note's principal value equals the negotiated price of $40,000, and the interest rate implied in the note is consistent with the market rate of interest for this level of risk (8%). What is the net present value of the note payable as on January 1^st, 2014?

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:

Goodwill should properly appear on the financial statements of a company which:

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

Discounts given for early payment of credit purchases of capital assets should be:

Land improvements such as paving, fencing, and lighting should be debited in full to the land account.

Discounts available for early payment of liabilities on purchases of capital assets should:

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:

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:

With respect to the development of website content, costs incurred thereof must be capitalized.

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).

Under IFRS, which of the following assets need not be disclosed separately on the face of the financial statements?

BR acquired a new machine that had a cash price of $10,800. The company paid $1,000 cash and traded in an old machine that originally cost $24,000 with accumulated amortization of $14,000. Give the exchange entry for BR under each of the two assumptions: Assumption A-the assets are similar: Assumption B-the assets are dissimilar:

Biological Assets may be classified as Property, plant and equipment or as inventory.

With respect to software intended for resale, costs may only be capitalized once technical feasibility is established.

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:

ABC Inc. is a public entity which applies the Fair Value Model to all of its Investment property. On January 1, Year 1, the company purchased a rental property for $1,200,000. This property was independently appraised at $1,100,000 on December 31^st, Year 1. The present value of the property's cash flows was $1,150,000 on that date. The year-end adjusting journal entry would include:

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.

CY acquired some land in exchange for 80 of its own common shares. The shares were traded widely and sold at the time for $120 per share. The land is similar to other tracts, which recently sold for $10,000. Give the entry for the acquisition of the land. Below the entry, justify the basis for the amount you used in the entry.

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