Question 1

According to U.S. GAAP, the following costs would be expensed as R&D:

Accepted Answer

The answer of According to U.S. GAAP, the following costs...

Question 2

Peanut Corporation exchanged land and cash of $6,500 for equipment. The land had a book value of $45,000 and a fair value of $34,000. Assume the exchange has commercial substance.
Required:
Prepare the journal entry to record the exchange.

Accepted Answer

The answer of Peanut Corporation exchanged land and cash of...

Question 3

Kerry, Inc., exchanged land and cash of $8,000 for equipment. The land had a book value of $55,000 and a fair value of $60,000.
Required:
Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

Accepted Answer

The answer of Kerry, Inc., exchanged land and cash of...

Question 4

Cool Globe Inc. entered into two transactions, as follows:
1. Purchased equipment paying $20,000 down and signed a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,000 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $19,253.
2. Purchased a tract of land in exchange for $10,000 cash down payment and a noninterest-bearing note requiring five $10,000 annual payments, with the first annual payment in one year. The fair value of the land is $46,000.
Required:
Prepare the journal entries for these transactions.

Accepted Answer

The answer of Cool Globe Inc. entered into two transactions,...

Question 5

McLean Mfg. Company sold a three-speed lathe for $24,000 cash. The lathe cost $66,200 and had a book value of $23,200.
Required:
Prepare the journal entry to record the sale.

Accepted Answer

The answer of McLean Mfg. Company sold a three-speed lathe...

Question 6

Explain the appropriate accounting method used to account for lump-sum purchases of a group of long-term assets.

Accepted Answer

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Question 7

Champion Industries exchanged a dust-scrubbing piece of equipment for another version of the same type of equipment and received $12,000 cash. The old dust scrubber cost $76,200 and had a book value of $54,500. The new dust scrubber had a fair value of $58,500.
Required:
Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

Accepted Answer

The answer of Champion Industries exchanged a dust-scrubbing piece of...

Question 8

Eli Company purchased assets of Whitney Inc. at auction for $1,560,000. An independent appraisal of the fair value of the assets acquired is listed below:  Required:
Prepare the journal entry to record the purchase of the assets.

Accepted Answer

The answer of Eli Company purchased assets of Whitney Inc....

Question 9

Watson Company purchased assets of Holmes Ltd. at auction for $1,300,000. An independent appraisal of the fair value of the assets acquired is listed below:  Required:
Prepare the journal entry to record the purchase of the assets.

Accepted Answer

The answer of Watson Company purchased assets of Holmes Ltd....

Question 10

Cheney Company sold a 20-ton mechanical draw press for $60,000. The old draw press cost $77,000 and had a book value of $55,000.
Required:
Prepare the journal entry to record the disposition.

Accepted Answer

The answer of Cheney Company sold a 20-ton mechanical draw...

Question 11

Montgomery Industries spent $600,000 in 2012 on a construction project to build a library. Montgomery also capitalized $30,000 of interest on the project in 2012. Montgomery financed 100% of the construction with a 10% construction loan. The project was completed on September 30, 2013. Additional expenditures in 2013 were as follows:  Required:
Determine the completed cost of the library. Show supporting computations.

Accepted Answer

The answer of Montgomery Industries spent $600,000 in 2012 on...

Question 12

Wendell Corporation exchanged an old truck and $25,500 cash for a new truck. The old truck had a book value of $6,000 (original cost of $25,000 less $19,000 in accumulated depreciation) and a fair value of $7,700.
Required:
1. Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.
2. Prepare the journal entry to record the exchange assuming that the exchange lacks commercial substance.

Accepted Answer

The answer of Wendell Corporation exchanged an old truck and...

Question 13

How are assets valued when they are acquired by issuing stock?

Accepted Answer

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Question 14

Kellogg Company and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods. In its annual report to shareholders, Kellogg disclosed the following:
DISPOSITIONS
Last year, the Company sold certain assets and liabilities of the Lender's Bagels business to Aurora Foods Inc. for $275 million in cash. As a result of this transaction, the Company recorded a pretax charge of $178.9 million ($119.3 million after tax or $.29 per share). This charge included approximately $57 million for disposal of other assets associated with the Lender's business, which were not purchased by Aurora. Disposal of these other assets was completed during the current year. The original reserve of $57 million exceeded actual losses from asset sales and related disposal costs by approximately $9 million. This amount was recorded as a credit to other income (expense), net during the current year.
Required:
Explain how the Kellogg transactions described could be interpreted as an example of earnings management.

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Question 15

How are donated assets recorded?

Accepted Answer

The answer of How are donated assets recorded?...

Question 16

Agasse Industries began construction of a new facility and took out a $1,500,000, 8% construction loan on April 1, 2013. Agasse made payments to the general contractor of $400,000 on April 1, $900,000 on August 31, and $500,000 on December 31.
Required:
Compute the amount of interest that Agasse would capitalize in 2013.

Accepted Answer

The answer of Agasse Industries began construction of a new...

Question 17

Walker Corporation exchanged land and $4,500 cash for material handling equipment. The land had a book value of $45,000 and a fair value of $58,000. Assume the exchange has commercial substance.
Required:
Prepare the journal entry to record the exchange.

Accepted Answer

The answer of Walker Corporation exchanged land and $4,500 cash...

Question 18

On March 15, 2013, Ellis Corporation issued 5,000 shares of its no-par common stock in exchange for a patent. On the date of the transaction, the market price of the common stock was $22 per share. Ellis also received a tract of land from the City of Montrose as an enticement to build a new office building on the site. The land had a fair value of $510,000 and Ellis was required to pay only $200,000 to secure title to the land.
Required:
1. Prepare the journal entries to record the transactions under U.S. GAAP.
2. Prepare the entry to record the government grant assuming Ellis prepares its financial statements according to International Financial Reporting Standards. Prepare the entry according to each of the alternatives available under IFRS.

Accepted Answer

The answer of On March 15, 2013, Ellis Corporation issued...

Question 19

Beacon Inc. received a gift of land and building in Twin Pines Park as an inducement to relocate. The land and buildings have fair values of $45,000 and $455,000.
Required:
Prepare journal entries to record the above transactions.

Accepted Answer

The answer of Beacon Inc. received a gift of land...

Question 20

Ford Inc. exchanged land and $7,500 cash for material handling equipment. The land had a book value of $75,000 and a fair value of $105,000. Assume the exchange has commercial substance.
Required:
Prepare the journal entry to record the exchange.

Accepted Answer

The answer of Ford Inc. exchanged land and $7,500 cash...

Quiz 10: Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

According to U.S. GAAP, the following costs would be expensed as R&D:

Peanut Corporation exchanged land and cash of $6,500 for equipment. The land had a book value of $45,000 and a fair value of $34,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.

Kerry, Inc., exchanged land and cash of $8,000 for equipment. The land had a book value of $55,000 and a fair value of $60,000. Required: Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

McLean Mfg. Company sold a three-speed lathe for $24,000 cash. The lathe cost $66,200 and had a book value of $23,200. Required: Prepare the journal entry to record the sale.

Explain the appropriate accounting method used to account for lump-sum purchases of a group of long-term assets.

Eli Company purchased assets of Whitney Inc. at auction for $1,560,000. An independent appraisal of the fair value of the assets acquired is listed below: Required: Prepare the journal entry to record the purchase of the assets.

Watson Company purchased assets of Holmes Ltd. at auction for $1,300,000. An independent appraisal of the fair value of the assets acquired is listed below: Required: Prepare the journal entry to record the purchase of the assets.

Cheney Company sold a 20-ton mechanical draw press for $60,000. The old draw press cost $77,000 and had a book value of $55,000. Required: Prepare the journal entry to record the disposition.

How are assets valued when they are acquired by issuing stock?

How are donated assets recorded?

Walker Corporation exchanged land and $4,500 cash for material handling equipment. The land had a book value of $45,000 and a fair value of $58,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.

Beacon Inc. received a gift of land and building in Twin Pines Park as an inducement to relocate. The land and buildings have fair values of $45,000 and $455,000. Required: Prepare journal entries to record the above transactions.

Ford Inc. exchanged land and $7,500 cash for material handling equipment. The land had a book value of $75,000 and a fair value of $105,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange.