ch 10- PPE acquisition and disposition

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

140000 The lump sum price incurred to acquire more than one asset is allocated among them based on their relative fair market values: ($160,000/ $480,000) ($420,000) = $140,000.

Delta River Company sold manufacturing equipment with a cost of $44,000 and accumulated depreciation of $32,000 for $9,000. The journal entry to record this transaction will includ

a debit to a loss acct for 3000 Dr: cash 9k AD: 32k loss: 3k Cr: equip 44k

The most extensively used method of accounting for overhead costs related to self-constructed assets implies:

assigning a pro rata portion of fixed overhead to the asset -to result in bettwe reognition of these costs in periods benefitted

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

by debiting accumulated depreciation

The accounting for interest costs incurred during construction recommended under GAAP is to:

capitalize the lesser of actual interest cost for the period or the amount of interest cost incurred during the period that the company could have avoided if expenditures for the asset had not been made.

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.

false - The company can capitalize the lesser of the actual interest cost incurred during the period or avoidable interest. Avoidable interest is 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.

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

false AD is contra acct w a credit balance. the entry to record the sale of a plant asset either at a gain or a loss will result in a debit to AD

If an exchange has commercial substance all losses should be recognized immediately and all gains should be deferred.

false both gains and losses should be recognized immediately

Cash or other assets received in an exchange are referred to as "boot."

false cashrecieved in exchange is referred to as boot

The receipt of an asset from a contribution should be recorded as additional paid-in capital.

false contributions should be recordedas revenue in the period received

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

false- land held for speculative purposes is classified as an investment

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

its market value

Plant assets purchased in exchange for a zero-interest-bearing note should be accounted for at the:

present value of the note

Cayo Casta Cabins Corporation recently purchased Ship Island Resort and Casino and the land on which it is located with the plan to tear down the resort and build a new luxury hotel on the site. Cayo Casta Cabin Corporation salvaged fixtures and wood flooring from Ship Island prior to demolishing the building. The proceeds from the sale of the salvaged materials should be

recorded as a reduction of the cost of the land. - proceeds from the sale of salvaged materials should reduce the cost of land

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

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

The cost of property acquired by the issuance of securities which are actively traded on an organized exchange is equal to:

the market value of the securities - property acquired in a noncash transaction is recorded at the market valye of the item given up or the MV of the property recieved

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

true- this one time special assessment would be included