c 1. Jazz Company acquired land and paid for it in full by issuing $600,000 of its 10 percent bonds payable and 40,000 shares of its
common stock, par $10. The stock was selling at $19 per share and the bonds were trading at 102. What amount should Jazz record as
the cost of the land?
a. $988,000 b. $1,000,000 c. $1,372,000 d. $1,387,200
c 2. Jazz Company purchased land with a current market value of $240,000. Its book value in the accounts of the seller was $130,500. In
exchange for the land, Jazz issued 20,000 shares of its common stock, par $10, with an estimated market value of $14 per share. Jazz
stock is not traded on an established stock exchange. What amount should Jazz record as the cost of the land?
a. $130,500 b.$200,000 c. $240,000 d.$280,000
b 3. The third year of a construction project began with a $30,000 balance in ..Construction in Progress. Included in that figure is $6,000 of
interest capitalized in the first two years. Construction expenditures during the third year were $80,000 which were incurred evenly
throughout the entire year. The company has had over $300,000 in interest-bearing debt outstanding the third year, at a weighted
average rate of 9 percent. How much interest for the third year is capitalized?
a. $3,600 b. $6,300 c. $9,360 d. $9,900
c 4. During the year just ended, Morton Company made the following expenditures relating to its plant building:
Continuing and frequent repairs…………….…………………………………………………………………. $160,000
Repainted the plant building…………………………………………………………………………………….. 40,000
Major improvements to the electrical wiring system…………………….…………………..…….…... 128,000
Partial replacement of roof tiles……………..…………………………………………………………………. 56,000
How much should be charged to repair and maintenance expense during the year just ended?
a. $160,000 b.$216,000 c.$256,000 d.$328,000
a 5. On September 10, Sandy Company incurred the following costs for one of its printing presses:
Purchase of stapling attachment………………….…………………………………………………………... $90,000
Installation of attachment……………………………………………………………………………….….……. 20,000
Replacement parts for renovation of press………………………………………………………………... 60,000
Labor and overhead in connection with renovation of press…………………………….….….…... 28,000
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?
a. $198,000 b.$110,000 c.$90,000 d.$88,000
b 6. Dewey Company purchased a machine that was installed and placed in service on January 2, 2001, at a total cost of $480,000.
Residual value was estimated at $80,000. The machine is being depreciated over ten years by the double-declining-balance method.
For the year 2002, Dewey should record depreciation expense of
a. $64,000. b.$76,800. c.$80,000. d.$96,000.
C 7. Malone Company traded in an old machine with a book value of $15,000 on a new similar machine. The new machine, which had a
cash price of $75,000, was purchased for $64,000 cash plus the old machine. Malone should record the cost of the new machine as
a.$64,000. b.$71,000. c.$75,000. d.$79,000.
