Exam 9: Long-Lived Assets

JB purchased a machine that had a list price of $70,000. JB paid $10,000 cash and signed a one-year non-interest-bearing note for $60,000. In addition, Baker paid 2 percent provincial sales tax on the list price, transportation costs of $150, and installation costs of $200. The going rate of interest is 12 percent. JB Company should record the cost of the machine as (rounded to the nearest dollar):

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.

A firm currently occupies a facility on land it also owns. The firm decides to raze this facility and in its place construct a new state-of-the-art complex. The gross cost to raze the old facility is $100,000 but the firm was able to sell some of the salvage material for $15,000. The book value of the old facility was $30,000 before demolition. The new complex was built at a cost of $400,000, excluding any other items mentioned previously in this question. What is the capitalized cost of the new complex?

The following expenditures were among those incurred by JB during the year ended December 31, 2013: Replacement of tiles on portion of roof that had been leaking = $4,000 Overhaul of machinery that is expected to extend its useful life for another two years = $6,000 How much should be charged to repairs and maintenance expense in 2013?

When a company's shares are issued in exchange for equipment and the fair values of both are determinable, the equipment will be valued at the fair value of the shares.

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.

Exchanges of non-monetary assets must always be recorded at the fair values of the assets given up, with any gains or losses going to income.

When a non-interest bearing note is issued as consideration for equipment acquired, the equipment will initially be recorded at the present value of the note payable.

Under both ASPE and IFRS, borrowing costs on qualifying self-constructed assets may be capitalized or expensed.

On September 1, 2013, SI exchanged 2,000 shares of its common shares for a parcel of land to be held for a future plant site. SI's common shares had a fair market value of $80 per share on September 1, 2013. (Based on several recent large trading volumes.) SI received netted $9,000 from the demolition of an existing building on the site. The book value of the land acquired is:

Negative goodwill arises when one company purchases the net assets of another company for an amount less than their fair market value, and is recorded as a gain on the statement of income/comprehensive income.

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.

Early in January, 2000, Vars Co. purchased a patent for a new consumer product for $540,000. At the time of the purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only 10 years. During 2004, the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. Calculate the amount Vars should charge to expense in 2004, assuming amortization is only recorded at the end of the fiscal year.

SAMTO, Inc. transferred $400 cash and a machine (cost, $10,000; accumulated amortization $9,000) to SLO UGH, Inc. in return for SLO UGH's similar machine (cost $12,000, accumulated amortization, $10,500). Provide SAMTO's entry for the exchange assuming the market value of SAMTO's machine was $1,600.

DC purchases a tract of land with a current market value of $130,000. Its book value in the accounts of the seller was $73,501. In exchange for the land, DC issued 10,000 of its common shares, with an estimated market value of $15 per share (these shares are not traded in an established market). DC should record the cost of the land at:

Assets received in donation should:

XYZ acquired Machine N from ABC. The machine had a cash price of $6,250. XYZ paid for the machine with $1,500 cash and traded in used Machine O, which is similar to N. Machine O originally cost $7,500 and had accumulated amortization of $3,000. Machine N had a market value of $5,500. Give the entry for XYZ to record the exchange.

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:

CA acquired a tract of land. The seller quoted a price of $30,000 cash, plus a $50,000, 16 percent, one-year, interest-bearing note payable. During later negotiations, the land was appraised by a local real estate agent at $76,000 and was shown on the city tax rolls at an assessed value for tax purposes at $63,000. After considerable negotiation, CA paid $25,000 cash and signed a two-year non-interest-bearing note, payable in two instalments of $30,000 each at the end of each of the next 2 years. The going rate of interest for such transactions was 12 percent. Give the entry to record the land acquisition.

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