ACCT 301 FINAL MULTIPLE CHOICE

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 Which of the following would be correct for Stanton to record in Case II?

Record Equipment at: $312,000 Record a loss of: $30,000

When a company develops a trademark the costs directly related to securing it should generally be capitalized. Which of the following costs associated with a trademark would not be capitalized?

Research and Development Costs

Contreras Corporation acquired a patent on May 1, 2020. Contreras paid cash of $35,000 to the seller. Legal fees of $1,500 were paid related to the acquisition. What amount should be debited to the patent account?

$36,500

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

$288,000

Huff Co. exchanged nonmonetary assets with Sayler Co. No cash was exchanged and the exchange had no commercial substance. The carrying amount of the asset surrendered by Huff exceeded both the fair value of the asset received and Sayler's carrying amount of that asset. Huff should recognize the difference between the carrying amount of the asset it surrendered and

the fair value of the asset it received as a loss.

A machine cost $1,200,000, has annual depreciation of $200,000, and has accumulated depreciation of $950,000 on December 31, 2020. On April 1, 2021, 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

$1,350,000

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.What amount of interest should be charged to expense?

$1,404,780

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

$1,480,320

In January, 2020, 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 2020, 600,000 tons were removed and 480,000 tons were sold. What is the amount of depletion that Yager should expense for 2020?

$1,512,000

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 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?

$1,537,255

Tiburon Corporation purchased a patent for $1,850,000 on November 30, 2018. It has a remaining legal life of 18 years. Tiburon estimates that the remaining useful life of the patent is useful life of 15 years. What balance will be reported on the December 31, 2020 balance sheet for the patent (if necessary, round your answer to the nearest dollar)?

$1,593,056

On January 3, 2019, Salazar Co. purchased machinery. The machinery has an estimated useful life of eight years and an estimated salvage value of $120,000. The depreciation applicable to this machinery was $260,000 for 2021 computed by the sum-of-the-years'-digits method. The acquisition cost of the machinery was

$1,680,000

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 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?

$1,866,667

Grover Corporation purchased a truck at the beginning of 2020 for $109,200. The truck is estimated to have a salvage value of $4,200 and a useful life of 120,000 miles. It was driven 21,000 miles in 2020 and 29,000 miles in 2021. What is the depreciation expense for 2021?

$25,375

Galt Company acquired a tract of land containing an extractable natural resource. Galt is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons, and that the land will have a value of $600,000 after restoration. Relevant cost information follows: Land $6,400,000 Estimated restoration costs 1,200,000 If Galt maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?

$1.40

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?

$140,000

On January 2, 2020, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2021. Expenditures for the construction were as follows: 1/2/20 $600,000 9/1/20 $1,800,000 12/31/20 $1,800,000 3/31/21 $1,800,000 9/30/21 $1,200,000 Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2020. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2020 and 2021. The interest capitalized was:

$144,000

During year 1, Yvo Corp. installed a production assembly line to manufacture furniture. In year 2, Yvo purchased a new machine and rearranged the assembly line to install this machine. The rearrangement did not increase the estimated useful life of the assembly line, but it did result in significantly more efficient production. The following expenditures were incurred in connection with this project: Machine$75,000 Labor to install machine 14,000 Parts added in rearranging the assembly line to provide future benefits 40,000 Labor and overhead to rearrange the assembly line 18,000 What amount of the above expenditures should be capitalized in year 2?

$147,000

Angst Company purchased equipment in January of 2011 for $400,000. The equipment was being depreciated on the straight-line method over an estimated useful life of 20 years, with no salvage value. At the beginning of 2021, when the equipment had been in use for 10 years, the company paid $50,000 to overhaul the equipment. As a result of this improvement, the company estimated that the useful life of the equipment would be extended an additional 5 years. What will be the depreciation expense recorded for this equipment in 2021?

$16,667

Floyd Company purchases Haeger Company for $2,400,000 cash on January 1, 2021. The book value of Haeger Company's net assets, as reflected on its December 31, 2020 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2020 indicates that the fair value of Haeger's tangible assets exceeded the book value by $180,000, and the fair value of identifiable intangible assets exceeded book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?

$225,000

Bend Company's December 31, 2020 balance sheet reports assets of $13,210,000 and liabilities of $4,275,000. The book values of Bend's assets approximate their fair values, except for land, which has a fair value $600,000 greater than its book value. On December 31, 2020, Blue Corporation paid $11,775,000 to acquire Bend. What amount of goodwill should Blue record as a result of this purchase?

$2,240,000

Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2020 for $5,000,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected from the patent were $400,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom's market interest rate, is $2,400,000. At what amount should the patent be carried on the December 31, 2021 balance sheet?

$2,400,000

Hall Co. incurred research and development costs in 2021 as follows: Materials used in research and development projects$ 950,000 Equipment acquired that will have alternate future uses in future research and development projects 3,000,000 Depreciation for 2021 on above equipment 500,000 Personnel costs of persons involved in research and development projects 750,000 Consulting fees paid to outsiders for research and development projects 300,000 Indirect costs reasonably allocable to research and development projects 225,000 $5,725,000 The amount of research and development costs charged to Hall's 2021 income statement should be

$2,750,000

Alonza Co. acquires 3 patents from Shaq Corp. for a total of $280,000. The patents were carried on Shaq's books as follows: Patent AA: $5,000; Patent BB: $2,000; and Patent CC: $3,000. When Alonza acquired the patents their fair values were: Patent AA: $20,000; Patent BB: $240,000; and Patent CC: $60,000. At what amount should Alonza record Patent BB?

$210,000 (280,000x240,000)/(20,000+240,000+60,000)

Gutierrez Company is constructing a building. Construction began in 2020 and the building was completed 12/31/20. 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

$3,700,000

Mendenhall Corporation constructed a building at a cost of $14,000,000. Weighted-average 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

$329,000

On February 1, 2020, 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, 2020. 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:

$335,000 and $1,425,000

On January 1, 2020, the Accumulated Depreciation—Machinery account of a particular company showed a balance of $1,480,000. At the end of 2020, after the adjusting entries were posted, it showed a balance of $1,580,000. During 2020, one of the machines which cost $500,000 was sold for $242,000 cash. This resulted in a loss of $16,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2020?

$342,000

Texarkana Company exchanged equipment that cost $85,000 and has accumulated depreciation of $29,800 and a fair value of $60,000. It receives in exchange an 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

$4,800 Gain

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

$400,000

In 2020, Edwards Corporation incurred research and development costs as follows: Materials and equipment $110,000 Personnel 130,000 Indirect costs 170,000 Total $410,000 These costs relate to a product that will be marketed in 2021. It is estimated that these costs will be recouped by December 31, 2023. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2020?

$410,000

During 2020, Logan 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 2020, 1,500,000 units were extracted and 1,250,000 units were sold. What is the amount of depletion expensed for 2020?

$450,000

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:

$450,000

Storm Corporation purchased a new machine on October 31, 2020. A $4,800 down payment was made and three monthly installments of $800 each are to be made beginning on November 30, 2020. 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, 2020 would be

$47,200

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)?

$50,000 loss

On September 1, 2017, Alpha Graphics Printing Co. incurred the following costs for one of its printing presses: Purchase of attachment$35,000 Installation of attachment 3,000 Replacement parts for renovation of press 12,000 Labor and overhead in connection with renovation of press 1,000 Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized?

$51,000

Horner Company buys a delivery van with a list price of $70,000. The dealer grants a 15% reduction in list price and an additional 2% cash discount on the net price if payment is made in 30 days. Sales taxes amount to $930 and the company paid an extra $700 to have a special device installed. What should be the recorded cost of the van?

$59,940

Ely Co. bought a patent from Baden Corp. on January 1, 2021, for $900,000. An independent consultant retained by Ely estimated that the remaining useful life at January 1, 2021 is 15 years. Its unamortized cost on Baden's accounting records was $450,000; the patent had been amortized for 5 years by Baden. How much should be amortized for the year ended December 31, 2021 by Ely Co.?

$60,000

The general ledger of Vance Corporation as of December 31, 2021, includes the following accounts: Copyrights$ 50000 Deposits with advertising agency (will be used to promote goodwill) 27000 Discount on bonds payable 70000 Excess of cost over fair value of identifiable net assets of Acquired subsidiary 480000 Trademarks 90000 In the preparation of Vance's balance sheet as of December 31, 2021, what should be reported as total intangible assets?

$620,000

White Airlines sold a used jet aircraft to Brown Company for $800,000, accepting a 5-year 6% note for the entire amount. Brown's incremental borrowing rate was 14%. The annual payment of principal and interest on the note was to be $189,930. The aircraft could have been sold at an established cash price of $651,460. The present value of an ordinary annuity of $1 at 8% for five periods is 3.99. The aircraft should be capitalized on Brown's books at

$651,460

On January 2, 2020, 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, 2020 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 56,000 What should be the cost of the new truck for financial accounting purposes?

$68,000

Coral Corporation began operating as a business in 2020. During January 2020, the company paid $300,000 in design costs to develop its trademark and $250,000 in legal and registration fees to secure the trademark. During October 2020, the company successfully defended its trademark, paying an additional $150,000 in legal fees during the process. At what amount should Coral Corporation report its trademark on its December 31, 2020 balance sheet?

$700,000

On August 1, 2020, 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, 2020. 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

$75,000

On September 10, 2020, Jenks Co. incurred the following costs for one of its printing presses: Purchase of attachment $55,000 Installation of attachment 5,000 Replacement parts for renovation of press 18,000 Labor and overhead in connection with renovation of press 7,000 Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized?

$85,000

On December 1, 2020, Hogan Co. purchased a tract of land as a factory site for $780000. 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 2020 were as follows: Cost to raze old building $70000 Legal fees for purchase contract and to record ownership 10000 Title guarantee insurance 16000 Proceeds from sale of salvaged materials 8000 In Hogan's December 31, 2020 balance sheet, what amount should be reported as land?

$868,000

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 $24000 is received by Armstrong Co.What amount should Armstrong Co. record for the asset received?

$90,000

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).

Lynne Corporation acquired a patent on May 1, 2020. Lynne paid cash of $90,000 to the seller. Legal fees of $2,000 were paid related to the acquisition. What amount should be debited to the patent account?

$92,000

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, $5280000 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.What is the avoidable interest for Arlington Company?

$939,220

On July 1, 2020, Mendes Corporation purchased factory equipment for $300,000. Salvage value was estimated to be $8,000. The equipment will be depreciated over five years using the double-declining balance method. Counting the year of acquisition as one-half year, Mendes should record depreciation expense for 2021 on this equipment of

$96,000

Which of the following statements about involuntary conversions are true?

-An involuntary conversion may result from condemnation of fire. -The gain or loss from an involuntary conversion may be reported as other revenues and gains or other expenses and losses. NOT TRUE: The gain or loss from an involuntary conversion should not be recognized when the enterprise reinvests in replacement assets.

A schedule of machinery owned by Micco Co. is presented below: Machine X: Total Cost 600,000 Salvage Value 40,000 Life 14 Machine Y: Total Cost 800,000 Salvage Value 80,000 Life 10 Machine Z: Total Cost 300,000 Salvage Value 60,000 Life 6 Micco computes depreciation by the composite method. The composite rate of depreciation (in percent) for these assets is:

8.94

McDonald Company acquired machinery on January 1, 2015 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2020, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald?

By setting future annual depreciation equal to 1/6 of the book value on January 1, 2020.

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?

Dr. Equipment 174,000 Cr. Investment in Guinn Co. Common Stock 150,000 Cr. Gain on Disposal of Investment 24,000

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?

Equipment 340,000 Loss on Disposal 55,000 Acc Depr 110,000 Equipment 465,000 Cash 40,000

Which of the following nonmonetary exchange transactions may result in recorded gains or losses?

Exchange of assets with a difference in future cash flows.

In accounting for plant assets, which of the following outlays made subsequent to acquisition should be fully expensed in the period the expenditure is made?

Expenditure made to maintain an existing asset so that it can function in the manner intended.

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)

Fair value test

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: Current Assessed Valuation: Land 600,000 Warehouse 400,000 Office Building 800,000 Total 1,800,000 Vendor's Original Cost: Land 550,000 Warehouse 370,000 Office Building 680,000 Total 1,600,000 What are the appropriate amounts that Mooney should record for the land, warehouse, and office building, respectively?

Land $540,000 Warehouse $360,000 Office building $720,000

Torque Co. has equipment with a carrying amount of $2400000. The expected future net cash flows from the equipment are $2445000, and its fair value is $2040000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment?

No impairment should be reported.

A plant asset has a cost of $40,000 and a salvage value of $10,000. The asset has a three-year life. If depreciation in the third year amounted to $5,000, which depreciation method was used?

Sum-of-the-Years' Digits

Which of the following statements is true regarding capitalization of interest?

The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.

Operating losses incurred during the start-up years of a new business should be

accounted for and reported like the operating losses of any other business.

Expenditures that extend the useful life of a plant asset without improving its quantity or quality are accounted for:

by debiting Accumulated Depreciation.

The cost of successfully defending a patent suit should be

capitalized and amortized over the remaining estimated useful life of the patent.

An expenditure made in connection with a machine being used by an enterprise should be

capitalized if it increases the quantity of units produced by the machine.

The intangible asset goodwill may be

capitalized only when purchased

Goodwill

is the difference between the fair value of the net tangible and identifiable intangible assets and the purchase price of the acquired business.

A purchased limited-life intangible asset ___ amortized and is impairment tested using ___.

is; the recoverability test and then the fair value test.

When funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the excess funds not needed to pay for construction may be temporarily invested in interest-bearing securities. Interest earned on these temporary investments should be

recognized as revenue of the period.