Exam 9: Long-Lived Assets

ER received a building as a donation at no cost, except for transfer costs and some ordinary repair costs. The company agreed to start operations within one year with an expected payroll for 1,000 employees. The preferred financial accounting at the transfer date is for ER to:

The amount of provincial sales tax paid on the purchase of machinery (a capital asset) should be debited to a:

With respect to exploration and evaluation assets, until what point can a company capitalize costs?

A consideration in determining the useful life of an intangible asset is not the:

A donated fixed asset for which the fair value has been determined should be recorded as a debit to capital assets and a credit to:

Company B acquired a capital asset, terms 1 percent discount if paid within 30 days. The invoice cost was $5,000. The asset should be recorded by Company B at:

ABC Inc. purchased Machinery in the amount of $50,000 on January 1^st, 2013. The machinery is estimated to have a 5-year useful life with no salvage value. The machinery qualifies for a 20% government subsidy. As a result, ABC Inc. received a government subsidy of $10,000 toward the purchase of the equipment. What is the effect of this subsidy on the company's 2013 Statement of Earnings/Comprehensive Income?

Idle land is least likely to be classified in property, plant and equipment.

Under the revaluation model, assets can be written up above their fair values.

On January 1, 2013, VW purchased a new machine for $30,000. The estimated useful life was 10 years with an estimated residual value of $6,000. Straight-line amortization is used and is computed to the nearest month. On July 1, 2021, the machine was sold for $9,000 cash. The gain (loss) on disposal was:

With respect to exploration and evaluation assets, costs incurred in the pre-exploration and evaluation phase are:

Self-constructed assets may never be valued in excess of fair market value, regardless of cost.

For some purposes, assets are classified as identifiable and unidentifiable. Which of the following is an unidentifiable asset?

From the following transaction information for PANTS-PRESSO Inc. for the current year, determine the ending balances for all property, plant and equipment accounts (including construction in progress). Show how you arrived at your answer for each. Ignore amortization, assume there were no beginning balances, and there is no need to show subsidiary accounts or include discussion. Acquired new equipment, paid $50,000 down, and signed a 5%, $200,000 note payable. Both the principal and one-year's interest is due one year from the date of purchase. The cost to install the equipment was $4,000; the cost to test it before placing it on-line was $2,000. PANTS-PRESSO spent $20,000 to train employees on the above new equipment. Materials, labour and overhead amounted to $400,000 for the construction of a building started and completed in the current year. The building was worth $600,000 at completion and will house the office operations for the company. Total interest cost recognized during the year was $50,000; $35,000 of that amount qualifies to be capitalized to this building. The land on which the building was constructed cost $100,000, also purchased this year. A second tract of land was acquired as a building site, for $45,000. A second building on this land also was started during the year but not completed. $5,000 was spent for surveying this second land parcel; $30,000 was spent to excavate the foundation of the building; and $8,000 was spent to clear oak trees on the property. PANTS-PRESSO was assessed $12,000 by the county for sewers and other infrastructure costs for the site of the completed building.

Leasehold improvements always are depreciated over their estimated useful life.

Ivory has a Model B widget-making machine that originally cost $77,000 (accumulated amortization, $44,000). It has a current market value of $20,000. Ivory exchanged this machine for a similar widget-making machine (a smaller one, Model A) owned by EC. The Model A originally cost $46,000 (accumulated amortization to date, $37,400). It has a current market value of $18,000. Ivory received $10,000 cash on the exchange. Ivory should record the cost of the Model A widget-making machine acquired at:

RST and XYZ exchanged non-monetary assets with no monetary consideration involved. The exchange did not culminate an earning process for either RST or XYZ. Both firms should value the asset received at:

Computer software is always accounted for as a finite-lived intangible.

What is the general principle for capitalizing costs to property, plant and equipment?

TZ acquired a machine and gave 10 instalment notes of $2,000 each. One note matures on the last day of each of the next 10 semi-annual periods. No interest was specified on the notes or the purchase contract. The going rate of interest for such transactions was 20 percent per annum. The cost of the new machine should be recorded by TZ as (rounded to the nearest dollar):