ACG3131 Ch 10

A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at A. the nominal cost of taking title to it. B. its fair value. C. the value assigned to it by the company's directors. D. one dollar (since the site cost nothing but should be included in the balance sheet).

B

Texarkana Company exchanged equipment that cost $66,000 and has accumulated depreciation of $30,000 for equipment with a fair value of $48,000 and received $12,000 cash. The exchange lacked commercial substance. The gain to be recognized from the exchange is A. $6,000 gain. B. $4,800 gain. C. $18,000 gain. D. $24,000 gain.

B

Average accumulated expenditures for year five on a construction project amounted to $70,000. The total cash invested in the project by the end of year five, was $160,000. During year six, the firm spent another $240,000 (total) on the project, uniformly throughout the year. Compute average accumulated expenditures for year six. A. $240,000 B. $400,000 C. $190,000 D. $280,000

D

Debt is frequently incurred when plant assets are acquired. For example, debt may be incurred on the purchase of plant assets. Debt may also be incurred during the construction of plant assets. How is the interest in these two cases treated for financial reporting? Debt for purchase Debt during construction A. capitalize capitalize B. expense expense C. capitalize expense D. expense capitalize

D

During 2017, Bay Co. constructed machinery for its own use and for sale to customers. Bank loans financed these assets both during construction and after construction was complete. How much of the interest incurred should be reported as interest expense in the 2017 Income Statement? Interest incurred for machinery for own use: Interest incurred for machinery held for sale A. All interest incurred Interest incurred after completion B. All interest incurred All interest incurred C. Interest incurred after completion Interest incurred after completion D. Interest incurred after completion All interest incurred

D

Avoidable interest is the lesser of actual interest cost incurred during a fiscal period or the amount of interest cost incurred during the construction period that a company could theoretically avoid if it had not made expenditures for the asset. T or F

F

Land held for speculative purposes is classified as Property, Plant and Equipment but is not depreciated. T or F

F

A special assessment by the municipality for sidewalks and a drainage system would be included in the cost of land. T or F

T

Cash received in an exchange is referred to as "boot." T or F

T

At the beginning of the year, Cann Co. started construction on a new $2 million addition to its plant. Total construction expenditures made during the year were $200,000 on January 2, $600,000 on May 1, and $300,000 on December 1. On January 2, the company borrowed $500,000 for the construction at 12%. The only other outstanding debt the company had was a 10% interest rate, long-term mortgage of $800,000, which had been outstanding the entire year. What amount of interest should Cann capitalize as part of the cost of the plant addition? A. $72,500 B. $140,000 C. $132,000 D. $60,000

A

Bogle Company purchased machinery for $320,000 on January 1, 2014. Straight-line depreciation has been recorded based on a $20,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2018 at a gain of $6,000. How much cash did Bogle receive from the sale of the machinery? A. $54,000. B. $66,000. C. $46,000. D. $86,000.

B

In an exchange of nonmonetary assets that lacks commercial substance in which a gain exists and no cash is paid or received, the asset received is recorded at: A. book value of the asset given up plus the deferred gain. B. fair value of the asset received less the gain deferred. C. fair value of the asset given up less the deferred gain. D. book value of the asset received less the gain deferred.

B

In an exchange that lacks commercial substance in which a gain exists and cash is received, the asset received is recorded at the: A. book value of the asset given up less the deferred portion of the gain. B. fair value of the asset received less the deferred portion of the gain. C. book value of the asset given up less cash received. D. fair value of the asset given up less cash received.

B

Which of the following is a not requirement for an asset to be categorized as a plant asset? A. Currently used in operations. B. Have physical substance. C. Have a useful life of at least three years. D. Not held for investment purposes.

C

On June 18, 2017, Dell Printing Co. incurred the following costs for one of its printing presses: Purchase of collating and stapling attachment $84,000 Installation of attachment 36,000 Replacement parts for overhaul of press 26,000 Labor and overhead in connection with overhaul 14,000 The overhaul resulted in a significant increase in production. Neither the attachment nor the overhaul increased the estimated useful life of the press. What amount of the above costs should be capitalized? A. $84,000 B. $160,000 C. $0 D. $120,000

B

Plant assets purchased in exchange for a zero-interest-bearing note should be accounted for at the: A. book value of the asset received. B. present value of the note. C. face value of the note. D. fair value of the asset received.

B

Burchell Company purchased land and a building for a lump sum cost of $420,000. The land has a fair market value of $160,000 and the building has a fair market value of $320,000. The cost assigned to the land is A. $210,000. B. $0. C. $140,000. D. $160,000.

C

On December 1, 2017, East Co. purchased a tract of land as a factory site for $300,000. The old building on the property was razed and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2017 were as follows: Cost to raze old building $25,000 Legal fees for purchase contract and to record ownership 5,000 Title guarantee insurance 6,000 Proceeds from sale of salvaged materials 4,000 In East's December 31, 2017 Balance Sheet, what amount should be reported as land? A. $311,000 B. $321,000 C. $332,000 D. $336,000

C

Property received through a contribution is to be recognized at its fair market value and offset with a credit entry to a: A. Miscellaneous Gain account. B. Additional Paid-in Capital account. C. Contribution Revenue account. D. Paid-in Capital account.

C

The most extensively used method of accounting for overhead costs related to self-constructed assets implies: A. assigning a portion of all overhead to the asset. B. assigning no fixed overhead to the asset. C. assigning a pro rata portion of fixed overhead to the asset. D. allocating overhead on the basis of lost production.

C

Watauga Company purchased equipment on July 1, 2017 for $70,000. Sales tax on the purchase was $700. Other costs incurred were freight charges of $800, insurance during shipping of $ 150, repairs of $1,300 for damage during installation, and installation costs of $1, 050. What is the cost of the equipment? A. $74,000 B. $70,000 C. $72,700 D. $71,500

C

Property, plant, and equipment includes A. deposits on machinery not yet received. B. idle equipment awaiting sale. C. land held for possible use as a future plant site. D. none of these answer choices would be classified as Property, plant, and equipment.

D

Which of the following statements is true regarding capitalization of interest? A. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period. B. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. C. Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account. D. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.

D

Zahn Corp.'s comprehensive Balance Sheet at December 31, 2017 and 2016 reported accumulated depreciation balances of $800,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $40,000 was the only property sold in 2017. Depreciation charged to operations in 2017 was: A. $220,000 B. $190,000 C. $200,000 D. $210,000

D

The entry to record the sale of a plant asset at a loss includes a credit to Accumulated Depreciation. T or F

F