Exam 9: Long-Lived Assets

On January 1, 2012, BC debited $4,000 of ordinary repairs to the asset account, Machinery. The machinery is depreciated on a straight-line basis over 10-years with no residual value. On December 31, 2014, the error was discovered. Give the entry, or entries, to correct the accounts on that date.

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 amount of amortization expense to be recorded on ABC's 2013 financial statements would be:

Goodwill should be reported on the balance sheet as:

With respect to Investment properties, Level 3 inputs are frequently used to determine the fair value of the properties.

When a firm receives a plant asset as a donation, what account should be credited?

On January 1, 2013, WT purchased a new machine to be used in the business. It paid $10,000 cash down payment and signed an interest-bearing note payable that required it to make three equal annual payments of $5,000 each (including principal and interest). The first payment will be made on December 31, 2013. Assume an 11 percent per annum interest rate, and use the net approach. (a) Give the entry on January 1, 2013, to record the acquisition: (b) Give the entry on December 31, 2013, to record the first payment on the note payable:

Accounting for tangible capital assets is primarily in conformity with the:

HF had asset A that was reflected in the company records as follows: Cost, $25,000; accumulated amortization, $20,000. Its market value: $6,000. HF acquired asset B that had a cash price of $13,500 and paid for it by trading in asset A plus paying cash boot of $8,000. Give the entry by HF to record the acquisition of asset B, assuming the two assets was: (A) Similar: (B) Dissimilar:

Under the Fair Value Model, tangible and intangible assets with a fair market value are revalued to fair value every year.

MD owns a tract of land, which it purchased in 2010 for $100,000. The land is held as a future plant site and has a fair market value of $140,000 on July 1, 2013. HC also owns a tract of land held as a future plant site. HC paid $180,000 for the land in 2011 and the land has a fair market value of $200,000 on July 1, 2013. On this date, MD exchanged its land and paid $50,000 cash for the land owned by HC. At what amount should MD record the land acquired in the exchange?

With respect to website development costs, costs incurred during the planning stage are to be expensed.

CH recently purchased the Elgin Hotel and the land on which it is located. The plans are to demolish the Elgin and to build a new luxury hotel on the site. CH should account for the total purchase cost of the Elgin as follows:

When a basket purchase of several ling-lived assets is made, the purchase price will normally be assigned using the relative fair values of those assets.

Training costs are not eligible for capitalization.

In the case of exchanges of both similar and dissimilar assets, the asset acquired should never be recorded at an amount that is more than its market value.

If an asset is purchased by giving a non-interest-bearing note payable, the use of an unrealistically low interest rate will cause the asset to be recorded at a cost that is too low and the interest expense amount reported on the income statement also will be too low.

On January 1, 2013, The Landing Strip Inc. purchased a 5-acre tract of land with a building thereon. The asking price was $17,500. Payment in full was as follows: Cash, $6,822; The Landing Strip Inc. common shares, par $5 (market value $20 per share based on several recent transactions on the market) 250 shares, and a $5,000 non-interest bearing note payable due December 31, 2016. The current market rate of interest is 12 percent. Allocate 20 percent of the cost to the building. Give the entry to record this transaction on January 1, 2013.

Negative Goodwill effectively results from a bargain purchase of assets, resulting in an unrealized gain on the statement of earnings.

Asset A, owned by LC, had a book value of $8,000 at 12/31/2011. At that time, LC exchanged Asset A and $50,000 cash with AE for B The market value of Asset A and the asking price of Asset B were $13,000 and $77,000, respectively, at 12/31/11. Assuming that these assets were dissimilar in nature, at what amount should Asset B be recorded by LC?Asset

Legal costs and successful court defence with respect to internally generated patents may both be capitalized.