Chapter 10 Computational

A

70. Mendenhall Corporation constructed a building at a cost of $14,000,000. Weightedaverage accumulated expenditures were $5,600,000, actual interest was $560,000, and avoidable interest was $280,000. If the salvage value is $1,120,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is a. $329,000. b. $336,000. c. $357,000. d. $469,000.

B

71. Messersmith Company is constructing a building. Construction began in 2017 and the building was completed 12/31/17. Messersmith made payments to the construction company of $3,000,000 on 7/1, $6,300,000 on 9/1, and $6,000,000 on 12/31. Weightedaverage accumulated expenditures were a. $3,075,000. b. $3,600,000. c. $9,300,000. d. $15,300,000.

B

102. On August 1, 2017, Hayes Corporation purchased a new machine on a deferred payment basis. A down payment of $18,000 was made and 4 monthly installments of $15,000 each are to be made beginning on September 1, 2017. The cash equivalent price of the machine was $72,000. Hayes incurred and paid installation costs amounting to $3,000. The amount to be capitalized as the cost of the machine is a. $72,000. b. $75,000. c. $78,000. d. $81,000.

C

100. Storm Corporation purchased a new machine on October 31, 2017. A $4,800 down payment was made and three monthly installments of $14,400 each are to be made beginning on November 30, 2017. The cash price would have been $46,400. Storm paid no installation charges under the monthly payment plan but an $800 installation charge would have been incurred with a cash purchase. The amount to be capitalized as the cost of the machine on October 31, 2017 would be a. $48,800. b. $48,000. c. $47,200. d. $46,400.

C

101. Storm Corporation purchased a new machine on October 31, 2017. A $4,800 down payment was made and three monthly installments of $14,400 each are to be made beginning on November 30, 2017. The cash price would have been $46,400. Storm paid no installation charges under the monthly payment plan but an $800 installation charge would have been incurred with a cash purchase. The amount to be capitalized as the cost of the machine on October 31, 2017 would be a. $48,800. b. $48,000. c. $47,200. d. $46,400.

D

103. On April 1, Mooney Corporation purchased for $1,620,000 a tract of land on which a warehouse and office building was located. The following data were collected concerning the property: What are the appropriate amounts that Mooney should record for the land, warehouse, and office building, respectively? a. Land, $550,000; warehouse, $370,000; office building, $680,000. b. Land, $600,000; warehouse, $400,000; office building, $800,000. c. Land, $556,875; warehouse, $374,625; office building, $688,500. d. Land, $540,000; warehouse, $360,000; office building, $720,000.

B

104. On August 1, 2017, Mendez Corporation purchased a new machine on a deferred payment basis. A down payment of $4,000 was made and 4 annual installments of $24,000 each are to be made beginning on September 1, 2017. The cash equivalent price of the machine was $92,000. Due to an employee strike, Mendez could not install the machine immediately, and thus incurred $1,200 of storage costs. Costs of installation (excluding the storage costs) amounted to $3,200. The amount to be capitalized as the cost of the machine is a. $92,000. b. $95,200. c. $96,400. d. $104,000.

D

105. Siegle Company exchanged 3,000 shares of Guinn Company common stock, which Siegle was holding as an investment, for equipment from Mayo Company. The Guinn Company common stock, which had been purchased by Siegle for $50 per share, had a quoted market value of $58 per share at the date of exchange. The equipment had a recorded amount on Mayo's books of $157,500. What journal entry should Siegle make to record this exchange? a. Equipment ........................................................................... 150,000 Investment in Guinn Co. Common Stock ................... 150,000 b. Equipment ........................................................................... 157,500 Investment in Guinn Co. Common Stock ................... 150,000 Gain on Disposal of Investment .................................. 7,500 c. Equipment ........................................................................... 157,500 Loss on Disposal of Investment .......................................... 16,500 Investment in Guinn Co. Common Stock ................... 174,000 d. Equipment ........................................................................... 174,000 Investment in Guinn Co. Common Stock ................... 150,000 Gain on Disposal of Investment .................................. 24,000

B

106. On January 2, 2017, Rapid Delivery Company traded in an old delivery truck for a newer model. The exchange lacked commercial substance. Data relative to the old and new trucks follow: Old Truck Original cost $45,000 Accumulated depreciation as of January 2, 2017 30,000 Average published retail value 14,000 New Truck List price $75,000 Cash price without trade-in 68,000 Cash paid with trade-in 56,500 What should be the cost of the new truck for financial accounting purposes? a. $56,000. b. $68,000. c. $71,000. d. $75,000.

C

107. On December 1, 2017, Kelso Company acquired new equipment in exchange for old equipment that it had acquired in 2014. The old equipment was purchased for $210,000 and had a book value of $79,800. On the date of the exchange, the old equipment had a fair value of $84,000. In addition, Kelso paid $273,000 cash for the new equipment, which had a list price of $378,000. The exchange lacked commercial substance. At what amount should Kelso record the new equipment for financial accounting purposes? a. $273,000. b. $352,800. c. $357,000. d. $378,000.

B

108. A machine cost $1,200,000, has annual depreciation of $200,000, and has accumulated depreciation of $950,000 on December 31, 2017. On April 1, 2018, when the machine has a fair value of $275,000, it is exchanged for a machine with a fair value of $1,350,000 and the proper amount of cash is paid. The exchange had commercial substance.The gain to be recorded on the exchange is a. $0. b. $25,000 c. $50,000 d. $150,000

D

109. A machine cost $1,200,000, has annual depreciation of $200,000, and has accumulated depreciation of $950,000 on December 31, 2017. On April 1, 2018, when the machine has a fair value of $275,000, it is exchanged for a machine with a fair value of $1,350,000 and the proper amount of cash is paid. The exchange had commercial substance. The new machine should be recorded at a. $1,075,000. b. $1,225,000. c. $1,325,000. d. $1,350,000.

A

110. Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exchanged for equipment with a fair value of $480,000 and $120,000 cash is received. The exchange lacked commercial substance. The gain to be recognized from the exchange is a. $48,000 b. $60,000 c. $180,000 d. $240,000

D

111. Equipment that cost $660,000 and has accumulated depreciation of $300,000 is exchanged for equipment with a fair value of $480,000 and $120,000 cash is received. The exchange lacked commercial substance. The new equipment should be recorded at a. $480,000. b. $360,000. c. $300,000. d. $288,000.

B

112. Two independent companies, Hager Co. and Shaw Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained: Hager's Land Cost and book value $576,000 Fair value based upon appraisal 720,000 Shaw's Land Cost and book value 360,000 Fair value based upon appraisal 630,000 The exchange was made, and based on the difference in appraised fair values, Shaw paid $90,000 to Hager. The exchange lacked commercial substance. For financial reporting purposes, Hager should recognize a pre-tax gain on this exchange of a. $0. b. $18,000. c. $90,000. d. $144,000.

A

113. Two independent companies, Hager Co. and Shaw Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained: Hager's Land Cost and book value $576,000 Fair value based upon appraisal 720,000 Shaw's Land Cost and book value 360,000 Fair value based upon appraisal 630,000 The exchange was made, and based on the difference in appraised fair values, Shaw paid $90,000 to Hager. The exchange lacked commercial substance. The new land should be recorded on Hager's books at a. $504,000. b. $576,000. c. $630,000. d. $720,000.

B

114. Two independent companies, Hager Co. and Shaw Co., are in the home building business. Each owns a tract of land held for development, but each would prefer to build on the other's land. They agree to exchange their land. An appraiser was hired, and from her report and the companies' records, the following information was obtained: Hager's Land Cost and book value $576,000 Fair value based upon appraisal 720,000 Shaw's Land Cost and book value 360,000 Fair value based upon appraisal 630,000 The exchange was made, and based on the difference in appraised fair values, Shaw paid $90,000 to Hager. The exchange lacked commercial substance. The new land should be recorded on Shaw's books at a. $360,000. b. $450,000. c. $630,000. d. $720,000.

B

115. Timmons Company traded machinery with a book value of $600,000 and a fair value of $1,000,000. It received in exchange from Lewis Company a machine with a fair value of $900,000 and cash of $100,000. Lewis's machine has a book value of $950,000. What amount of gain should Timmons recognize on the exchange (assuming lack of commercial substance)? a. $ -0- b. $40,000 c. $100,000 d. $400,000

D

116. Lewis Company traded machinery with a book value of $950,000 and a fair value of $900,000. It received in exchange from Timmons Company a machine with a fair value of $1,000,000. Lewis also paid cash of $100,000 in the exchange. Timmons's machine has a book value of $950,000. What amount of gain or loss should Lewis recognize on the exchange (assuming lack of commercial substance)? a. $100,000 gain b. $ -0-. c. $5,000 loss d. $50,000 loss

B

117. Durler Company traded machinery with a book value of $1,080,000 and a fair value of $1,800,000. It received in exchange from Hoyle Company a machine with a fair value of $1,620,000 and cash of $180,000. Hoyle's machine has a book value of $1,710,000. What amount of gain should Durler recognize on the exchange (assuming lack of commercial substance)? a. $ -0- b. $72,000 c. $180,000 d. $720,000

D

118. Hoyle Company traded machinery with a book value of $760,000 and a fair value of $720,000. It received in exchange from Durler Company a machine with a fair value of $800,000. Hoyle also paid cash of $80,000 in the exchange. Durler's machine has a book value of $760,000. What amount of gain or loss should Hoyle recognize on the exchange (assuming lack of commercial substance)? a. $80,000 gain b. $ -0- c. $4,000 loss d. $40,000 loss

C

119. Peterson Company purchased machinery for $960,000 on January 1, 2014. Straight-line depreciation has been recorded based on a $60,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2018 at a gain of $18,000. How much cash did Peterson receive from the sale of the machinery? a. $138,000 b. $162,000 c. $198,000 d. $258,000

C

120. Sutherland Company purchased machinery for $1,120,000 on January 1, 2014. Straightline depreciation has been recorded based on a $70,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2018 at a gain of $21,000. How much cash did Sutherland receive from the sale of the machinery? a. $161,000. b. $189,000. c. $231,000. d. $301,000.

B

121. Ecker Company purchased a new machine on May 1, 2009 for $528,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $24,000. The company has recorded monthly depreciation using the straight-line method. On March 1, 2018, the machine was sold for $72,000. What should be the loss recognized from the sale of the machine? a. $0. b. $10,800. c. $24,000. d. $34,800.

B

122. On January 1, 2009, Mill Corporation purchased for $760,000, equipment having a useful life of ten years and an estimated salvage value of $40,000. Mill has recorded monthly depreciation of the equipment on the straight-line method. On December 31, 2017, the equipment was sold for $140,000. As a result of this sale, Mill should recognize a gain of a. $0. b. $28,000. c. $68,000. d. $140,000.

B

63. Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down two buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for title investigation and making the purchase. Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the land that should be recorded by Wilson Co. is a. $1,470,720. b. $1,480,320. c. $1,484,820. d. $1,494,420.

D

64. Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down two buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for title investigation and making the purchase. Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the building that should be recorded by Wilson Co. is a. $4,205,700. b. $4,207,260. c. $4,219,800. d. $4,521,360.

D

65. On February 1, 2017, Nelson Corporation purchased a parcel of land as a factory site for $320,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2017. Costs incurred during this period are listed below: Demolition of old building $ 20,000 Architect's fees 35,000 Legal fees for title investigation and purchase contract 5,000 Construction costs 1,390,000 (Salvaged materials resulting from demolition were sold for $10,000.) Nelson should record the cost of the land and new building, respectively, as a. $345,000 and $1,415,000. b. $330,000 and $1,430,000. c. $330,000 and $1,425,000. d. $335,000 and $1,425,000.

C

66. Worthington Chandler Company purchased equipment for $40,000. Sales tax on the purchase was $2,400. Other costs incurred were freight charges of $600, repairs of $350 for damage during installation, and installation costs of $675. What is the cost of the equipment? a. $40,000 b. $42,400 c. $43,675 d. $44,025

C

67. Fogelberg Company purchased equipment for $30,000. Sales tax on the purchase was $1,500. Other costs incurred were freight charges of $400, repairs of $700 for damage during installation, and installation costs of $450. What is the cost of the equipment? a. $30,000. b. $31,500. c. $32,350. d. $33,050.

D

68. During self-construction of an asset by Samuelson Company, the following were among the costs incurred: Fixed overhead for the year $1,000,000 Portion of $1,000,000 fixed overhead that would be allocated to asset if it were normal production 90,000 Variable overhead attributable to self-construction 50,000 What amount of overhead should be included in the cost of the self-constructed asset? a. $ -0- b. $50,000 c. $90,000 d. $140,000

D

69. During self-construction of an asset by Richardson Company, the following were among the costs incurred: Fixed overhead for the year $1,000,000 Portion of $1,000,000 fixed overhead that would be allocated to asset if it were normal production 80,000 Variable overhead attributable to self-construction 120,000 What amount of overhead should be included in the cost of the self-constructed asset? a. $ -0- b. $ 80,000 c. $120,000 d. $200,000

A

72. Huffman Corporation constructed a building at a cost of $30,000,000. Weighted-average accumulated expenditures were $12,000,000, actual interest was $1,200,000, and avoidable interest was $600,000. If the salvage value is $2,400,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is a. $705,000. b. $735,000. c. $765,000. d. $1,005,000.

B

73. Gutierrez Company is constructing a building. Construction began in 2017 and the building was completed 12/31/17. Gutierrez made payments to the construction company of $3,000,000 on 7/1, $6,600,000 on 9/1, and $6,000,000 on 12/31. Weighted-average accumulated expenditures were a. $3,150,000. b. $3,700,000. c. $9,600,000. d. $15,600,000.

A

74. On May 1, 2017, Goodman Company began construction of a building. Expenditures of $600,000 were incurred monthly for 5 months beginning on May 1. The building was completed and ready for occupancy on September 1, 2017. For the purpose of determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures on the building during 2017 were a. $500,000. b. $600,000. c. $2,400,000. d. $3,000,000.

C

75. During 2017, Kimmel Co. incurred weighted-average accumulated expenditures of $1,600,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2017 was a $2,000,000, 10%, 5-year note payable dated January 1, 2017. What is the amount of interest that should be capitalized by Kimmel during 2017? a. $0. b. $40,000. c. $160,000. d. $200,000.

B

76. On March 1, Felt Co. began construction of a small building. Payments of $480,000 were made monthly for three months beginning March 1. The building was completed and ready for occupancy on June 1. In determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures are a. $120,000. b. $240,000. c. $480,000. d. $960,000.

A

77. On March 1, Imhoff Co. began construction of a small building. Payments of $800,000 were made monthly for three months beginning March 1. The building was completed and ready for occupancy on June 1. In determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures are a. $400,000. b. $800,000. c. $1,600,000. d. $3,480,000.

C

81. During 2017, Bass Corporation constructed assets costing $4,000,000. The weightedaverage accumulated expenditures on these assets during 2017 was $2,400,000. To help pay for construction, $1,760,000 was borrowed at 10% on January 1, 2017, and funds not needed for construction were temporarily invested in short-term securities, yielding $36,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a $2,000,000, 10-year, 9% note payable dated January 1, 2011. What is the amount of interest that should be capitalized by Bass during 2017? a. $240,000. b. $120,000. c. $233,600. d. $377,600.

A

91. Dodson Company traded in a manual pressing machine for an automated pressing machine and gave $40,000 cash. The old machine cost $465,000 and had a net book value of $355,000. The old machine had a fair value of $300,000. Which of the following is the correct journal entry to record the exchange assuming commercial substance?

C

96. Hardin Company received $120,000 in cash and a used computer with a fair value of $360,000 from Page Corporation for Hardin Company's existing computer having a fair value of $480,000 and an undepreciated cost of $450,000 recorded on its books. The transaction has no commercial substance. How much gain should Hardin recognize on this exchange, and at what amount should the acquired computer be recorded, respectively? a. $0 and $330,000 b. $1,537 and $221,537 c. $30,000 and $360,000 d. $120,000 and $450,000

C

99. On December 1, Miser Corporation exchanged 6,000 shares of its $25 par value common stock held in treasury for a parcel of land to be held for a future plant site. The treasury shares were acquired by Miser at a cost of $40 per share, and on the exchange date the common shares of Miser had a fair value of $50 per share. Miser received $18,000 for selling scrap when an existing building on the property was removed from the site. Based on these facts, the land should be capitalized at a. $148,000. b. $240,000. c. $282,000. d. $300,000.

D

Use the following information for questions 78 through 80. On March 1, 2017, Newton Company purchased land for an office site by paying $2,700,000 cash. Newton began construction on the office building on March 1. The following expenditures were incurred for construction: Date Expenditures March 1, 2017 $ 1,800,000 April 1, 2017 2,520,000 May 1, 2017 4,500,000 June 1, 2017 4,800,000 The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed on March 1, 2017 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2017 was a $1,500,000, 12%, 6-year note payable dated January 1, 2017. 78. The weighted-average accumulated expenditures on the construction project during 2017 were a. $1,920,000. b. $14,670,000. c. $1,560,000. d. $3,280,000.

A

Use the following information for questions 78 through 80. On March 1, 2017, Newton Company purchased land for an office site by paying $2,700,000 cash. Newton began construction on the office building on March 1. The following expenditures were incurred for construction: Date Expenditures March 1, 2017 $ 1,800,000 April 1, 2017 2,520,000 May 1, 2017 4,500,000 June 1, 2017 4,800,000 The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed on March 1, 2017 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2017 was a $1,500,000, 12%, 6-year note payable dated January 1, 2017. 79. The actual interest cost incurred during 2017 was a. $450,000. b. $504,000. c. $252,000. d. $420,000.

B

Use the following information for questions 78 through 80. On March 1, 2017, Newton Company purchased land for an office site by paying $2,700,000 cash. Newton began construction on the office building on March 1. The following expenditures were incurred for construction: Date Expenditures March 1, 2017 $ 1,800,000 April 1, 2017 2,520,000 May 1, 2017 4,500,000 June 1, 2017 4,800,000 The office was completed and ready for occupancy on July 1. To help pay for construction, and purchase of land $3,600,000 was borrowed on March 1, 2017 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2017 was a $1,500,000, 12%, 6-year note payable dated January 1, 2017. 80. Assume the weighted-average accumulated expenditures for the construction project are $4,350,000. The amount of interest cost to be capitalized during 2017 is a. $391,500. b. $414,000. c. $450,000. d. $504,000.

C

Use the following information for questions 82 through 85. On January 2, 2017, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2018. Expenditures for the construction were as follows: January 2, 2017 $ 600,000 September 1, 2017 1,800,000 December 31, 2017 1,800,000 March 31, 2018 1,800,000 September 30, 2018 1,200,000 Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2017. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2017 and 2018. 82. What were the weighted-average accumulated expenditures for 2017? a. $1,600,000 b. $1,500,000 c. $1,200,000 d. $3,000,000

B

Use the following information for questions 82 through 85. On January 2, 2017, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2018. Expenditures for the construction were as follows: January 2, 2017 $ 600,000 September 1, 2017 1,800,000 December 31, 2017 1,800,000 March 31, 2018 1,800,000 September 30, 2018 1,200,000 Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2017. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2017 and 2018. 83. The interest capitalized for 2017 was: a. $540,000 b. $144,000 c. $456,000 d. $180,000

D

Use the following information for questions 82 through 85. On January 2, 2017, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2018. Expenditures for the construction were as follows: January 2, 2017 $ 600,000 September 1, 2017 1,800,000 December 31, 2017 1,800,000 March 31, 2018 1,800,000 September 30, 2018 1,200,000 Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2017. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2017 and 2018. 84. What were the weighted-average accumulated expenditures for 2018 by the end of the construction period? a. $1,170,000 b. $4,905,000 c. $5,958,000 d. $4,158,000

B

Use the following information for questions 82 through 85. On January 2, 2017, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2018. Expenditures for the construction were as follows: January 2, 2017 $ 600,000 September 1, 2017 1,800,000 December 31, 2017 1,800,000 March 31, 2018 1,800,000 September 30, 2018 1,200,000 Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2017. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2017 and 2018. 85. The interest capitalized for 2018 was: a. $374,220 b. $354,915 c. $ 77,220 d. $297,000

B

Use the following information for questions 94 and 95. Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of $72,000 and a fair value of $90,000. The asset given up by Armstrong Co. has a book value of $120,000 and a fair value of $114,000. Boot of $24,000 is received by Armstrong Co. 94. What amount should Glen Inc. record for the asset received? a. $90,000 b. $96,000 c. $114,000 d. $120,000

A

Use the following information for questions 94 and 95. Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of $72,000 and a fair value of $90,000. The asset given up by Armstrong Co. has a book value of $120,000 and a fair value of $114,000. Boot of $24,000 is received by Armstrong Co. 95. What amount should Armstrong Co. record for the asset received? a. $90,000 b. $96,000 c. $114,000 d. $120,000

B

Use the following information to answer questions 86 - 90. Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. 86. What are the weighted-average accumulated expenditures? a. $11,680,000 b. $8,413,333 c. $19,680,000 d. $9,840,000

D

Use the following information to answer questions 86 - 90. Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. 87. What is the weighted-average interest rate used for interest capitalization purposes? a. 11% b. 10.85% c. 10.5% d. 10.65%

D

Use the following information to answer questions 86 - 90. Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. 88. What is the avoidable interest for Arlington Company? a. $384,000 b. $1,236,820 c. $438,682 d. $939,220

A

Use the following information to answer questions 86 - 90. Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. 89. What is the actual interest for Arlington Company? a. $2,344,000 b. $2,376,000 c. $1,960,000 d. $939,220

C

Use the following information to answer questions 86 - 90. Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $6,400,000 on March 1, $5,280,000 on June 1, and $8,000,000 on December 31. Arlington Company borrowed $3,200,000 on January 1 on a 5- year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $6,400,000 note payable and an 11%, 4-year, $12,000,000 note payable. 90. What amount of interest should be charged to expense? a. $1,020,778 b. $1,960,000 c. $1,404,780 d. $1,107,178

A

Use the following information to answer questions 92 & 93. Below is the information relative to an exchange of assets by Stanton Company. The exchange lacks commercial substance. Case 1: Book Value 450,000 Fair Value 510,000 Cash Paid 90,000 Case 2: Book Value 300,000 Fair Value: 270,000 Cash Paid: 42,000 92. Which of the following would be correct for Stanton to record in Case I? Record Equipment at:

C

Use the following information to answer questions 92 & 93. Below is the information relative to an exchange of assets by Stanton Company. The exchange lacks commercial substance. Case 1: Book Value 450,000 Fair Value 510,000 Cash Paid 90,000 Case 2: Book Value 300,000 Fair Value: 270,000 Cash Paid: 42,000 93. Which of the following would be correct for Stanton to record in Case II?

A

Use the following information to answer questions 97 & 98. Jamison Company purchased the assets of Booker Company at an auction for $5,600,000. An independent appraisal of the fair value of the assets is listed below: Land $1,900,000 Building 2,800,000 Equipment 2,100,000 Trucks 3,400,000 97. Assuming that specific identification costs are impracticable and that Jamison allocates the purchase price on the basis of the relative fair values, what amount would be allocated to the Trucks? a. $1,866,667 b. $2,800,000 c. $3,360,000 d. $3,400,000

D

Use the following information to answer questions 97 & 98. Jamison Company purchased the assets of Booker Company at an auction for $5,600,000. An independent appraisal of the fair value of the assets is listed below: Land $1,900,000 Building 2,800,000 Equipment 2,100,000 Trucks 3,400,000 98. Assuming that specific identification costs are impracticable and that Jamison allocates the purchase price on the basis of the relative fair values, what amount would be allocated to the Building? a. $2,118,920 b. $2,800,000 c. $5,100,000 d. $1,537,255