Acc 304 Final Exam

On January 1, 2014, the merchandise inventory of Glaus, Inc. was $1,200,000. During 2014 Glaus purchased $2,400,000 of merchandise and recorded sales of $3,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2014?

$1,350,000. COGS = $3,000,000 × .75 = $2,250,000 $1,200,000 + $2,400,000 - $2,250,000 = $1,350,000.

Depletion expense

is usually part of cost of goods sold.

Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2015?

$21,750. ​($93,600 - $3,600) ÷ 120,000 = $0.75; ​​​$0.75 × 29,000 = $21,750.

Henry Company purchased a depreciable asset for $240,000. The estimated salvage value is $22,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset?

$218,000. $240,000 - $22,000 = $218,000.

Mendenhall Corporation constructed a building at a cost of $10,000,000. Weighted-average accumulated expenditures were $4,000,000, actual interest was $400,000, and avoidable interest was $200,000. If the salvage value is $800,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is

$235,000. [($10,000,000 + $200,000) - $800,000] ÷ 40 = $235,000.

Muckenthaler Company sells product 2005WSC for $40 per unit. The cost of one unit of 2005WSC is $36, and the replacement cost is $35. The estimated cost to dispose of a unit is $8, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

$32. NRV = $40 - $8 = $32, RC = $35 NRV - PM = $32 - ($40 × .40) = $16, cost = $36.

Which of the following costs incurred internally to create an intangible asset is generally expensed?

Research and development costs.

Assets that qualify for interest cost capitalization include

assets under construction for a company's own use.

For a nonmonetary exchange of plant assets, accounting recognition should not be given to

part of a gain when the exchange has no commercial substance and cash is paid (cash paid/received is less than 25% of the fair value of the exchange).

The cost of land typically includes the purchase price and all of the following costs except

private driveways and parking lots.

When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to

that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.

The period of time during which interest must be capitalized ends when

the asset is substantially complete and ready for its intended use.

When using a perpetual inventory system

All of these answer choices are correct.

Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has

no commercial substance and additional cash is paid.

Which of the following is not a capital expenditure?

Repairs that maintain an asset in operating condition.

The most common method of recording depletion for accounting purposes is the

units-of-production method.

If an industrial firm uses the units-of-production method for computing depreciation on its only plant asset, factory machinery, the credit to accumulated depreciation from period to period during the life of the firm will

vary with production.

Jamison Company purchased the assets of Booker Company at an auction for $4,200,000. An independent appraisal of the fair value of the assets is listed below: Land ​$1,425,000 Building ​2,100,000 Equipment​ 1,575,000 Trucks​ 2,550,000 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?

​$1,152,941. [$2,100,000 ÷ ($1,425,000 + $2,100,000 + $1,575,000 + $2,550,000)] × $4,200,000 = ​​​​$1,152,941.

In January, 2014, Yager Corporation purchased a mineral mine for $5,100,000 with removable ore estimated by geological surveys at 2,000,000 tons. The property has an estimated value of $300,000 after the ore has been extracted. The company incurred $1,500,000 of development costs preparing the mine for production. During 2014, 500,000 tons were removed and 400,000 tons were sold. What is the amount of depletion for 2014?

​$1,575,000. [($5,100,000 - $300,000 + $1,500,000) ÷ 2,000,000] × 400,000 = $1,575,000.

Hardin Company received $80,000 in cash and a used computer with a fair value of $240,000 from Page Corporation for Hardin Company's existing computer having a fair value of $320,000 and an undepreciated cost of $300,000 recorded on its books. The transaction has commercial substance. How much gain should Hardin recognize on this exchange, and at what amount should the acquired computer be recorded, respectively?

​$20,000 and $240,000 $320,000 - $300,000 = $20,000; $240,000 (fair value).

If a corporation purchases land and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on

​the intention of management for the property when the building was acquired.

Jamison Company purchased the assets of Booker Company at an auction for $4,200,000. An independent appraisal of the fair value of the assets is listed below: Land​ $1,425,000 Building ​2,100,000 Equipment ​1,575,000 Trucks​ 2,550,000 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?

$1,400,000. ​[$2,550,000 ÷ ($1,425,000 + $2,100,000 + $1,575,000 + $2,550,000)] × $4,200,000 = ​​​​$1,400,000

On January 1, 2014, Garden Company purchased a new machine for $2,800,000. The new machine has an estimated useful life of nine years and the salvage value was estimated to be $100,000. Depreciation was computed on the sum-of-the-years'-digits method. What amount should be shown in Garden's balance sheet at December 31, 2015, net of accumulated depreciation, for this machine?

$1,780,000. $2,800,000 - [($2,800,000 - $100,000) × (9/45 + 8/45)] = $1,780,000. (for two years)

The following information is available for October for Norton Company. Beginning inventory $300,000 Net purchases 900,000 Net sales 1,800,000 Percentage markup on cost 66.67% A fire destroyed Norton's October 31 inventory, leaving undamaged inventory with a cost of $18,000. Using the gross profit method, the estimated ending inventory destroyed by fire is?

$102,000. ($300,000 + $900,000) - ($1,800,000 ÷ 5/3) - $18,000 = $102,000

Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 4,800 units that cost $12 each. During the month, the company made two purchases: 2,000 units at $13 each and 8,000 units at $13.50 each. Checkers also sold 8,600 units during the month. Using the average cost method, what is the amount of cost of goods sold for the month?

$111,370. [(4,800 × $12) + (2,000 × $13) + (8,000 × $13.50] ¸ (4,800 + 2,000 + 8,000)=$12.95; $12.95 × 8,600 = $111,370.

Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2014?

$15,750. ($93,600 - $3,600) ÷ 120,000 = $0.75; ​​​$0.75 × 21,000 = $15,750.

Floyd Company purchases Haeger Company for $1,600,000 cash on January 1, 2015. The book value of Haeger Company's net assets, as reflected on its December 31, 2014 balance sheet is $1,240,000. An analysis by Floyd on December 31, 2012 indicates that the fair value of Haeger's tangible assets exceeded the book value by $120,000, and the fair value of identifiable intangible assets exceeded book value by $90,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?

$150,000. $1,240,000+$120,000+$90,000 = $1,450,000. $1,600,000-$1,450,000 = $150,000.

On March 1, Felt Co. began construction of a small building. Payments of $320,000 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

$160,000. $320,000 (3/12 + 2/12 + 1/12) = $160,000.

Messersmith Company is constructing a building. Construction began in 2014 and the building was completed 12/31/14. Messersmith made payments to the construction company of $2,000,000 on 7/1, $4,200,000 on 9/1, and $4,000,000 on 12/31. Weighted-average accumulated expenditures were

$2,400,000. ​($2,000,000 × 6/12) + ($4,200,000 × 4/12) = $2,400,000.

Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Historical cost: $20 / $35 Replacement cost: $22.50 / $27 Estimated cost to dispose $5 / $13 Estimated selling price $40 / $65 In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Oslo use for products #1 and #2, respectively?

$20.00 and $32.50. Product 1: RC = $22.50, NRV = $40 - $5 = $35 NRV - PM = $35 - ($40 × .3) = $23, cost = $20. Product 2: RC = $27, NRV = $65 - $13 = $52 NRV - PM = $52 - ($65 × .3) = $32.50, cost = $35.

On March 1, Imhoff Co. began construction of a small building. Payments of $400,000 were made monthly for four 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

$200,000. $400,000 (3/12 + 2/12 + 1/12) = $200,000

On December 1, 2014, Kelso Company acquired new equipment in exchange for old equipment that it had acquired in 2011. The old equipment was purchased for $140,000 and had a book value of $53,200. On the date of the exchange, the old equipment had a fair value of $56,000. In addition, Kelso paid $182,000 cash for the new equipment, which had a list price of $252,000. The exchange lacked commercial substance. At what amount should Kelso record the new equipment for financial accounting purposes?

$235,200. ​$56,000 + $182,000 -2800 = $235,200.

Timmons Company traded machinery with a book value of $360,000 and a fair value of $600,000. It received in exchange from Lewis Company a machine with a fair value of $540,000 and cash of $60,000. Lewis's machine has a book value of $570,000. What amount of gain should Timmons recognize on the exchange (assuming lack of commercial substance)?

$24,000. ​($600,000 - $360,000) × [$60,000 ÷ ($60,000 + $540,000)] = $24,000.

Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 25%. The following account balances are available: Inventory, March 1 $440,000 Purchases 344,000 Purchase returns 16,000 Sales during March 600,000 The estimate of the cost of inventory at March 31 would be?

$288,000. COGS = $600,000 ÷ 1.25 = $480,000 ($440,000 + $344,000 - $16,000) - $480,000 = $288,000.

Wilson Co. purchased land as a factory site for $900,000. Wilson paid $80,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect's fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,800,000. An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000. The cost of the building that should be recorded by Wilson Co. is

$3,014,240. Architects fees 31,200 + Construction cost 2,600 + Excavation cost 10,440 + contractor 2,800,000 + 170,000 interest cost = $3,014,240

In March, 2014, Mallory Mines Co. purchased a coal mine for $8,000,000. Removable coal is estimated at 1,500,000 tons. Mallory is required to restore the land at an estimated cost of $960,000, and the land should have a value of $840,000. The company incurred $2,000,000 of development costs preparing the mine for production. During 2014, 450,000 tons were removed and 300,000 tons were sold. The total amount of depletion that Mallory should record for 2014 is

$3,036,000. [($8,000,000 + $960,000 - $840,000 + $2,000,000) ÷ 1,500,000] × 450,000 ​​​= $3,036,000.

Gutierrez Company is constructing a building. Construction began in 2014 and the building was completed 12/31/14. Gutierrez made payments to the construction company of $2,500,000 on 7/1, $5,500,000 on 9/1, and $5,000,000 on 12/31. Weighted-average accumulated expenditures were

$3,083,333. ($2,500,000 × 6/12) + ($5,500,000 × 4/12) = $3,083,333.

Dotel Company's 12/31/15 balance sheet reports assets of $9,000,000 and liabilities of $3,750,000. All of Dotel's assets' book values approximate their fair value, except for land, which has a fair value that is $600,000 greater than its book value. On 12/31/15, Egbert Corporation paid $9,150,000 to acquire Dotel. What amount of goodwill should Egbert record as a result of this purchase?

$3,300,000 ($9,000,000 + $600,000) - $3,750,000 = $5,850,000. $9,150,000 - $5,850,000 = $3,300,000.

On January 1, 2008, Forrest Company purchased equipment at a cost of $130,000. The equipment was estimated to have a salvage value of $4,000 and it is being depreciated over eight years under the sum-of-the-years'-digits method. What should be the charge for depreciation of this equipment for the year ended December 31, 2015?

$3,500. ($130,000 - $4,000) × 1/36 = $3,500.(last year)

June Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of 40 units that cost $20 per unit. During the current month, the company purchased 240 units at $20 each. Sales during the month totaled 180 units for $43 each. What is the cost of goods sold using the LIFO method?

$3,600. 180 × $20/unit = $3,600.

On May 1, 2014, Goodman Company began construction of a building. Expenditures of $360,000 were incurred monthly for 5 months beginning on May 1. The building was completed and ready for occupancy on September 1, 2014. For the purpose of determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures on the building during 2014 were

$300,000. ($360,000 × 4/12) + ($360,000 × 3/12) + ($360,000 × 2/12) + ($360,000 × 1/12) ​​​= $300,000.

Dicer uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $260,000 ($396,000), purchases during the current year at cost (retail) were $1,370,000 ($2,200,000), freight-in on these purchases totaled $86,000, sales during the current year totaled $2,000,000, and net markups (markdowns) were $48,000 ($72,000). What is the ending inventory value at cost?

$371,228. $396,000 + $2,200,000 + $48,000 - $2,000,000 - $72,000 = $572,000 ($260,000 + $1,370,000 + $86,000) ÷ ($396,000 + $2,200,000 + $48,000) = .649

Carson Company purchased a depreciable asset for $280,000. The estimated salvage value is $14,000, and the estimated useful life is 10,000 hours. Carson used the asset for 1,500 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset?

$39,900. ​[$280,000 - $14,000) ÷ 10,000] × 1,500 = $39,900.

Keck Co. had 150 units of product A on hand at January 1, 2014, costing $21 each. Purchases of product A during January were as follows: 1/10: 200 units @ $22 1/18: 250 units @ $23 1/28: 100 units @ $24 A physical count on January 31, 2014 shows 200 units of product A on hand. The cost of the inventory at January 31, 2014 under the LIFO method is?

$4,250. (150 × $21) + (50 × $22) = $4,250.

Slotkin Products purchased a machine for $39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2014 is

$4,875 ​($39,000 - 0) × .25 × 6/12 = $4,875.

Lewis Company traded machinery with a book value of $760,000 and a fair value of $720,000. It received in exchange from Timmons Company a machine with a fair value of $800,000. Lewis also paid cash of $80,000 in the exchange. Timmons's machine has a book value of $760,000. What amount of gain or loss should Lewis recognize on the exchange (assuming lack of commercial substance)?

$40,000 loss $720,000 - $760,000 = ($40,000).

Twilight Corporation acquired End-of-the-World Products on January 1, 2014 for $6,400,000, and recorded goodwill of $1,200,000 as a result of that purchase. At December 31, 2015, the End-of-the-World Products Division had a fair value of $5,440,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $4,640,000 at that time. What amount of loss on impairment of goodwill should Twilight record in 2015?

$400,000. $5,440,000-$4,640,000=$800,000 $1,200,000-$800,000=$400,000

Jasmine Company purchased a depreciable asset for $225,000. The estimated salvage value is $15,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?

$42,188. $225,000 × [(1 ÷ 8) × 2] = $56,250 ​​​($225,000 - $56,250) × [(1 ÷ 8) × 2] = $42,188.

Platteville Corporation has the following account balances at 12/31/15: Amortization expense $ 20,000 Goodwill 280,000 Patent, net of $60,000 amortization 140,000 What amount should Platteville report for intangible assets on the 12/31/12 balance sheet?

$420,000. $280,000 + $140,000 = $420,000.

Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $531,200 ($653,800), purchases during the current year at cost (retail) were $2,137,200 ($2,772,200), freight-in on these purchases totaled $127,800, sales during the current year totaled $2,704,000, and net markups (markdowns) were $4,000 ($192,600). What is the ending inventory value at cost?

$434,721. $653,800 + $2,772,200 + $4,000 - $2,704,000 - $192,600 = $533,400 ($531,200 + $2,137,200 + $127,800) ÷ ($653,800 + $2,772,200 + $4,000) = 81.5% $533,400 × .815 = $434,721.

Huffman Corporation constructed a building at a cost of $20,000,000. Weighted-average accumulated expenditures were $8,000,000, actual interest was $800,000, and avoidable interest was $400,000. If the salvage value is $1,600,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is

$470,000. [($20,000,000 + $400,000) - $1,600,000] ÷ 40 = $470,000.

. Lexington Company sells product 1976NLC for $60 per unit. The cost of one unit of 1976NLC is $54, and the replacement cost is $52. The estimated cost to dispose of a unit is $12, and the normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market?

$48. NRV = $60 - $12 = $48, RC = $52 NRV - PM = $48 - ($60 × .40) = $24, cost = $54

Boxer Inc. uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $196,500 ($297,000), purchases during the current year at cost (retail) were $1,704,000 ($2,596,800), freight-in on these purchases totaled $79,500, sales during the current year totaled $2,333,000, and net markups were $207,000. What is the ending inventory value at cost?

$490,624. $297,000 + $2,596,800 + $207,000 - $2,333,000 = $767,800 ($196,500 + $1,704,000 + $79,500) ÷ ($297,000 + $2,596,800 + $207,000) = 63.9% $767,800 × .639 = $490,624.

Jenks Corporation acquired Linebrink Products on January 1, 2015 for $8,000,000, and recorded goodwill of $1,500,000 as a result of that purchase. At December 31, 2015, Linebrink Products had a fair value of $6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of $5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2015?

$500,000. $6,800,000-$5,800,000=$1,000,000 $1,500,000-$1,000,000=$500,000.

Dennis Company purchases Miles Company for $4,200,000 cash on January 1, 2015. The book value of Miles Company's net assets reported on its December 31, 2014 financial statement was $3,800,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. What amount of gain or goodwill is recognized by Dennis?

$520,000 gain. $3,800,000+$600,000 +$320,000=$4,720,000; $4,720,000-$4,200,000=$520,000.

On September 19, 2014, Markham Co. purchased machinery for $285,000. Salvage value was estimated to be $15,000. The machinery will be depreciated over eight years using the sum-of-the-years'-digits method. If depreciation is computed on the basis of the nearest full month, Markham should record depreciation expense for 2015 on this machinery of

$58,125. ​($270,000 × 8/36 × 9/12) + ($270,000 × 7/36 × 3/12) = $58,125.

Slotkin Products purchased a machine for $39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2015 to the closest dollar is

$58,531. ​($39,000 - 0) × .25 × 6/12 = $4,875; ​​​($39,000 - $4,875) × .25 = $8,531.25 (rounded to $8,531).

The following information was derived from the 2014 accounting records of Perez Co.: Perez's Goods Perez's Central Warehouse Held by Consignees Beginning inventory $130,000 $ 14,000 Purchases 525,000 70,000 Freight-in 10,000 Transportation to consignees 5,000 Freight-out 30,000 8,000 Ending inventory 145,000 20,000 Perez's 2014 cost of sales was?

$589,000. $130,000 + $14,000 + $525,000 + $70,000 + $10,000 + $5,000 - $145,000 - $20,000 = $589,000.

During 2014, Corporation acquired a mineral mine for $4,000,000 of which $400,000 was ascribed to land value after the mineral has been removed. Geological surveys have indicated that 10 million units of the mineral could be extracted. During 2014, 1,800,000 units were extracted. What is the amount of depletion for 2014?

$648,000. [($4,000,000 - $400,000) ÷ 10,000,000] × 1,500,000= $648,000.

Drake Corporation had the following amounts, all at retail: Beginning inventory $3,600 Purchases $140,000 Purchase returns $6,000 Net markups $18,000 Abnormal shortage $4,000 Net markdowns $2,800 Sales revenue $77,000 Sales returns $1,800 Employee discounts $1,600 Normal shortage $2,600 What is Drake's ending inventory at retail?

$69,400. $3,600 + $134,000 + $18,000 - $4,000 - $75,200 - $1,600 - $2,800 - $2,600 = $69,400.

For 2014, cost of goods available for sale for Tate Corporation was $2,700,000. The gross profit rate on sales was 20%. Sales for the year were $2,400,000. What was the amount of the ending inventory?

$780,000. $2,700,000 - ($2,400,000 × .80) = $780,000.

During 2014, Kimmel Co. incurred weighted-average accumulated expenditures of $800,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2014 was a $1,000,000, 10%, 5-year note payable dated January 1, 2012. What is the amount of interest that should be capitalized by Kimmel during 2014?

$80,000. $800,000 × .10 = $80,000.

Endeavor Company purchased a depreciable asset for $800,000. The estimated salvage value is $40,000, and the estimated useful life is 10,000 hours. Endeavor used the asset for 1,100 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset?

$83,600. ​[($800,000 - $40,000) ÷ 10,000] × 1,100 = $83,600.

Halltown Company purchased a depreciable asset for $450,000. The estimated salvage value is $30,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?

$84,375. $450,000 × [(1 ÷ 8) × 2] = $112,500 ​​​($450,000 - $112,500) × [(1 ÷ 8) × 2] = $84,375.

The following information is available for October for Barton Company. Beginning inventory $250,000 Net purchases 750,000 Net sales 1,500,000 Percentage markup on cost 66.67% A fire destroyed Barton's October 31 inventory, leaving undamaged inventory with a cost of $15,000. Using the gross profit method, the estimated ending inventory destroyed by fire is?

$85,000. ($250,000 + $750,000) - ($1,500,000 ÷ 5/3) - $15,000 = $85,000.

.Leeper Corporation incurred the following costs in 2015: Acquisition of R&D equipment with a useful life of 4 years in R&D projects $900,000 Cost of making minor modifications to an existing product 140,000 Advertising expense to introduce a new product 700,000 Engineering costs incurred to advance a product to full production stage 750,000 What amount should Leeper record as research & development expense in 2015?

$975,000. ($900,000 ÷ 4) + $750,000 = $975,000.

June Corp. sells one product and uses a perpetual inventory system. The beginning inventory consisted of 40 units that cost $20 per unit. During the current month, the company purchased 240 units at $20 each. Sales during the month totaled 180 units for $43 each. What is the number of units in the ending inventory?

100 units 40 + 240 - 180 = 100 units

Broadway Corporation was granted a patent on a product on January 1, 2004. To protect its patent, the corporation purchased on January 1, 2015 a patent on a competing product which was originally issued on January 10, 2011. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing the product. The cost of the competing patent should be?

Amortized over a maximum period of 9 years.

The cost of successfully defending a patent suit should be?

Amortized over the remaining estimated useful life of the patent.

Which characteristic is not possessed by intangible assets?

Physical existence.

Which of the following costs should be capitalized in the year incurred?

Costs to successfully defend a patent.

Costs incurred internally to create intangibles are?

Expensed as incurred.

Which of the following is a contract-related intangible assts?

Franchise

What is consigned inventory?

Goods that are shipped, but title remains with the shipper.

Buerhle Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test(s) to be used is (are)?

Recoverability Test: No Fair Value Test: Yes

Goods in transit which are shipped f.o.b. shipping point should be?

Included in the inventory of the buyer.

Goods in transit which are shipped f.o.b. destination should be?

Included in the inventory of the seller.

Wilson Co. purchased land as a factory site for $900,000. Wilson paid $80,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect's fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,800,000. An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000. ​The cost of the land that should be recorded by Wilson Co. is

Land 900,000+ Building demolition 80,000 - salavage 5,400 + legal fees 3,480 + title insurance cost 2,400 + city pavement assessment 6,400 = 986,880 $986,880.

On April 1, Mooney Corporation purchased for $1,624,500 a tract of land on which a warehouse and office building was located. The following data were collected concerning the property: ​Current Assessed Valuation​Vendor's Original Cost Land​$600,000​$560,000 Warehouse​400,000​360,000 Office building​ 800,000​ 680,000 ​$1,800,000​$1,600,000 What are the appropriate amounts that Mooney should record for the land, warehouse, and office building, respectively?

Land: 60/180 × $1,624,500 = $541,500. ​​​Warehouse: 40/180 × $1,624,500 = $361,000. ​​​Office Building: 80/180 × $1,624,500 = $722,000.

The recoverability test is used to determine any impairment loss on which of the following types of intangible assets?

Limited life intangibles.

Which intangible assets are amortized?

Limited-Life: Yes Indefinite-Life: No

Research and development costs?

May result in the development of a patent.

Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to?

Patents and amortized over the remaining useful life of the patent.

Which of the following methods of amortization is normally used for intangible assets?

Straight-line

Use of the double-declining balance method

all of these answers are correct.

The cost of land does not include

costs of improvements with limited lives.

Use of the sum-of-the-years'-digits method

means the book value should not be reduced below salvage value.