56.
Cowboy Development incurred the following costs associated with the purchase of a piece
of land that it will use to re-build an office building:
Sale price of the land
$400,000
Sale of salvaged parts already on land
$20,000
Demolition of the old building
$30,000
Ground breaking ceremony (food and supplies)
$1,500
Land preparation and leveling
$7,500
What amount should be recorded for the purchase of the land?
57.
Bahama Catering purchased a commercial dishwasher by paying cash of $8,000. The
dishwasher’s fair value on the date of the purchase was $10,000. The company incurred
$600 in transportation costs, $500 installation fees, and paid $300 annual insurance of the
equipment. For what amount will Bahama record the dishwasher?
58.
Bahama Catering purchased a commercial dishwasher by paying cash of $5,000. The
dishwasher’s fair value on the date of the purchase was $5,600. The company incurred
$400 in transportation costs, $300 installation fees, and paid a $200 fine for illegal parking
while the dishwasher was being delivered. For what amount will Bahama record the
dishwasher?
59.
The following financial information is from Cook Company:
Accounts Payable
$55,000
Land
$90,000
Inventory
$10,500
Accounts Receivable
$7,500
Equipment
$8,000
Deferred Revenue
$58,500
Short-term Investments
$20,000
Notes Receivable (due in 8 months)
$45,500
Interest Payable
$2,000
Patents
$75,000
What is the total amount of property, plant, and equipment assuming the accounts above
reflect normal activity?
60.
Capital Construction purchased a 3-acre tract of land for a building site for $350,000. The
company demolished the old building at a cost of $12,000, but was able to sell scrap from
the building for $1,500. The cost of title insurance was $900 and attorney fees for
reviewing the contract was $500. Property taxes paid were $3,000, of which $250 covered
the period after the purchase date. The capitalized cost of the land is:
61.
Landon Co. purchased a $500,000 tract of land that is intended to be the site of a new
office complex. Landon incurred additional costs and realized salvage proceeds as follows:
Demolition of existing building on site
$75,000
Legal and other fees to close escrow
15,000
Proceeds from sale of demolition scrap
10,000
What would be the capitalized cost of the land?
Purchase price
Demolition costs
Legal fees
Total cost of land
62.
Fruitasia purchased land, a building, and equipment for $800,000. The estimated fair
values of the land, building, and equipment are $100,000, $700,000, and $200,000,
respectively. At what amount would the company record the land?
63.
Productive assets that are physically used up or depleted are:
64.
The following financial information is from Cook Company:
Accounts Payable
$55,000
Land
$90,000
Inventory
$10,500
Accounts Receivable
$7,500
Equipment
$8,000
Deferred Revenue
$58,500
Short-term Investments
$20,000
Notes Receivable (due in 8 months)
$45,500
Interest Payable
$2,000
Patents
$75,000
What is the amount of long-term assets assuming the accounts above reflect normal
activity?
65.
The following financial information is from Cook Company:
Accounts Payable
$55,000
Land
$90,000
Inventory
$10,500
Accounts Receivable
$7,500
Equipment
$8,000
Deferred Revenue
$58,500
Short-term Investments
$20,000
Notes Receivable (due in 8 months)
$45,500
Interest Payable
$2,000
Patents
$75,000
What is the amount of intangible assets assuming the accounts above reflect normal
activity?
7-29
66.
The legal life of a patent is:
67.
An exclusive 20-year right to manufacture a product or to use a process is a:
68.
The exclusive right to benefit from a creative work, such as a film, is a:
69.
A word, slogan, or symbol that distinctively identifies a company, product, or service is a:
70.
Research and development costs should be:
71.
Morgan Pharmaceutical spends $50,000 this year in research and development for a new
drug to cure liver damage. By the end of the year, management feels confident that the
new drug will gain FDA approval and lead to higher future sales. What impact will the
$50,000 spending have on this year’s financial statements?
72.
Aspen, Inc. developed a new horse transport device and incurred research and
development costs of $250,000. Rather than continue with their own research, Aspen
decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the
total assets and expenses for these developments?
73.
Research and development costs should be capitalized when the:
74.
Bio-Lab Pharmaceuticals carried on a project to develop a new drug that dramatically
shortened the recovery period for flu infection. The project cost the company $150,000
before Bio-Lab abandoned the project due to the slim possibility to gain FDA approval.
Bio-Lab then spent $300,000 on another project developing a kind of shot that achieves
the same goal for flu recovery, and the company is confident in gaining FDA approval for
the new shot and in making profits out of the shot. What amount would be expensed?
75.
Goodwill is:
76.
In accounting, goodwill
77.
In accounting, goodwill
78.
The balance sheet of Cattleman’s Steakhouse shows assets of $86,400 and liabilities of
$15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is
$15,000. Longhorn paid Cattleman’s $95,000 to acquire it. Longhorn should record
goodwill on this purchase of:
79.
Northern purchased the entire business of Southern including all its assets and liabilities
for $600,000. Below is information related to the two companies:
Northern
Southern
Fair value of assets
$1,050,000
$800,000
Fair value of liabilities
575,000
300,000
Reported assets
800,000
650,000
Reported liabilities
500,000
250,000
Net Income for the year
60,000
50,000
Purchase price
Less: Fair value of net assets:
Assets
$800,000
Less: Liabilities assumed
How much goodwill did Northern pay for acquiring Southern?
80.
Lake Incorporated purchased all of the outstanding stock of Huron Company paying
$850,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired
assets and liabilities were:
Book Value
Fair Value
Current assets (net)
$130,000
$125,000
Property, plant, equip. (net)
600,000
750,000
Liabilities
175,000
175,000
Purchase price
Assets ($125,000 + 750,000)
Less: Liabilities assumed
Goodwill
Lake would record goodwill of:
81.
Which of the following subsequent expenditures would be capitalized?
82.
Which of the following subsequent expenditures would be capitalized?
83.
The cost of an engine tune-up is an example of which of the following expenditures after
acquisition?
84.
Which of the following subsequent expenditures would not be capitalized?
85.
The cost of replacing a major component on a piece of equipment is an example of:
86.
Adding a refrigeration unit to a delivery truck that previously did not have this capability is
an example of:
87.
The purchase of a new cooling system for $150,000 to upgrade an office building owned
by the company would be accounted for as:
88.
Woods Company made an ordinary repair to a delivery truck at a cost of $500. Woods’
accountant debited the asset account, Equipment. Was this treatment an error, and if so,
what will be the effect on Woods’ financial statements?
89.
The replacement of a major component increased the productive capacity of equipment
from 10 units per hour to 18 units per hour. The expenditure for the replacement
component should be debited to: