Exam 9: Long-Lived Assets

A new machine was acquired by JR that had a quoted price of $6,000. JR paid $1,500 cash and transferred 100 shares common shares (current market value, $40 per share, based on several recent large trading transactions.). Other payments related to the acquisition were: transportation, $150; provincial sales tax, $50, and installation costs, $200. The asset account should be debited for $___________________.

A change in the amortization rate for an intangible asset should be accounted for:

The cost of rearranging the factory equipment to increase efficiency should be recorded as a capital expenditure in the normal situation.

VC purchased a machine for use in operations at a quoted price of $35,120. Full payment was cash of $8,000, plus a two-year non-interest-bearing note for $27,121. The market rate of interest for this note is 8 percent. VC should record the cost of the machine as (rounded to the nearest dollar):

The only costs of an internally developed patent that should be capitalized as patent costs are legal fees, other registration costs, and successful court tests.

The following information pertains to equipment constructed by a firm for its own use. The construction is finished. Materials used in construction \ 40,000 Labour cost during construction 20,000 F ringe benefits on above labour 5,000 Incremental overhead due to Construction 8,000 Interest expense on debt during Construction (assume this meets the requirements for interest capitalization) 4,000 The market value of the equipment immediately after construction was completed was $65,000. What is the loss on construction incurred by the firm?

Non-monetary exchanges should be valued using the book value method when two companies engage in an exchange of similar assets.

Machines Unlimited acquired Machine N (new) in exchange for a slightly used machine (Machine O) and received $3,000 cash (Machine O was in high demand). The machines were similar. Machine N had a market value (cash equivalent price) of $27,000. Machine O originally cost $45,000 and accumulated amortization at the date of exchange was $24,000. Give the entry to record the exchange by Machines Unlimited.

When a capital asset is acquired by donation, the preferred accounting at acquisition date is to:

SC has an old asset that originally cost $225,000 (accumulated amortization, $114,000). Its current market value is $114,001. SC purchased another asset by paying cash $13,500 and trading in the old asset. The new asset had a list price of $150,000 and a cash price of $135,000. The assets are similar. SC should record the cost of the new machine at:

Under the successful efforts method of accounting for exploration and evaluation of assets:

Shimoon Co. has recently accepted the proposal from the Township of Cane that publicly owned property with a warehouse located on it will be donated to Shimoon if Shimoon will build a branch plant in Cane. The appraised value of the land is $520,000 and of the warehouse is $1,286,000. Prepare the journal entry for this transaction:

On January 1, 2013, DB purchased a used cement truck from NC. The carrying value of the truck on NC's books was $12,500. DB paid cash of $2,000 and gave a 2-year note that required semi-annual payments of $4,000 each payable at the end of each semi-annual period (the market rate of interest was 12 percent). A similar truck reportedly was sold recently for $14,000. DB Company should record the cost of the truck as (rounded to the nearest dollar):

EC has an old asset that originally cost $150,000; the accumulated amortization is $76,000. Its current market value is $81,000. This old asset is exchanged for another asset (new) that has a list price of $100,000. EC should record the following as the cost of the new asset received, assuming that the two assets are:

	Dissimilar	Similar
1	$100,000	$81,000
2	81,000	76,000
3	81,000	74,000
4	90,000	74,000

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 SLO UGH's entry for the exchange assuming the market value of Santo's machine was $1,600 and SLO UGH's Inc. machine was $2,000.

CAC acquired a gym in exchange for two $200,000 bonds. The bonds pay 12 percent annual interest and mature at the end of 10 years. They have no determinable market value. The going rate of interest on liabilities with this level of risk is 16 percent. CAC should record the cost of the gymnasium at:

Strong Co. purchased a trademark from Wall Co. for $60,000 on July 1, 2000. Expenditures of $10,000 for successful litigation in defence of the trademark were paid on July 1, 2002. Strong estimates that the useful life of the trademark will be 20 years from the date of acquisition. Calculate the carrying value of the trademark at December 31, 2002.

Under ASPE, both legal and constructive decommissioning liabilities are recognized on the financial statements.

Should the following fees associated with the registration of an internally developed patent be capitalized?

	Legal Fees	Registration Fees
1	No	No
2	No	Yes
3	Yes	No
4	Yes	Yes

Choose the correct statement about a restriction placed on the donation of equipment to a firm.