978-1259722660 Chapter 10 Solution Manual Part 1

Unlock access to all the studying documents.

View Full Document

Question 10–1

The difference between tangible and intangible long-lived, revenue-producing

Question 10–2

The cost of property, plant, and equipment and intangible assets includes the

purchase price (less any discounts received from the seller); transportation costs paid

Question 10–3

The cost of a developed natural resource includes the acquisition costs for the use

Question 10–4

Purchased intangibles are valued at their original cost to include the purchase

Solutions Manual, Vol.1, Chapter 10 10–1

McGraw-Hill Education.

Chapter 10 Property, Plant, and Equipment and

Intangible Assets: Acquisition

QUESTIONS FOR REVIEW OF KEY TOPICS

Answers to Questions (continued)

Question 10–5

Goodwill represents the unique value of the company as a whole over and above

all identifiable tangible and intangible assets. This value results from a company’s

Because goodwill can’t be separated from a company, it is not possible for a

buyer to acquire it without also acquiring the whole company or a substantial portion

of it. Goodwill will appear as an asset in a balance sheet only when it was paid for in

Question 10–6

A lump-sum purchase price generally is allocated based on the relative fair values

Question 10–7

Assets acquired in exchange for deferred payment contracts are valued at their

Question 10–8

Assets acquired through the issuance of equity securities are valued at the fair

Question 10–9

Solutions Manual, Vol.1, Chapter 10 10–2

McGraw-Hill Education.

Answers to Questions (continued)

Solutions Manual, Vol.1, Chapter 10 10–3

McGraw-Hill Education.

Question 10–10

Question 10–11

The basic principle used to value assets acquired in a nonmonetary exchange is to

Question 10–12

The two exceptions are (1) when fair value is not determinable and (2) when the

Question 10–13

GAAP require the capitalization of interest incurred during the construction of

assets for a company’s own use as well as for assets constructed for sale or lease.

Solutions Manual, Vol.1, Chapter 10 10–4

McGraw-Hill Education.

Answers to Questions (continued)

Question 10–14

Average accumulated expenditures for a period is an approximation of the

average amount of debt the company would have had outstanding if it borrowed all of

the funds necessary for construction. If construction expenditures are incurred equally

Question 10–15

Applying the specific interest method, the interest rate on any

construction-related debt is used up to the amount of the construction debt and any

Question 10–16

GAAP defines research and development as follows:

Research is planned search or critical investigation aimed at discovery of new

Development is the translation of research findings or other knowledge into a

Question 10–17

GAAP specifically excludes from current R&D expense the cost of property,

plant, and equipment and intangible assets that have “alternative future uses” beyond

Solutions Manual, Vol.1, Chapter 10 10–5

McGraw-Hill Education.

Answers to Questions (continued)

Question 10–18

GAAP requires the capitalization of software development costs incurred after

technological feasibility is established. Technological feasibility is established “when

the enterprise has completed all planning, designing, coding, and testing activities that

Question 10–19

The cost of developed technology is capitalized and expensed over its expected

useful life. Developed technology relates to those projects that have reached

technological feasibility. The cost of in-process R&D is capitalized and treated as an

Question 10–20

Under U.S. GAAP, donated assets are recorded as revenue. However, IAS No. 20

requires that government grants be recognized in income over the periods necessary to

Solutions Manual, Vol.1, Chapter 10 10–6

McGraw-Hill Education.

Answers to Questions (concluded)

Question 10–21

Other than software development costs incurred after technological feasibility has

been established, U.S. GAAP requires all research and development expenditures to

Question 10–22

The periodic amortization percentage for capitalized computer software

Question 10–23

The successful efforts method allows companies to capitalize only exploration

Brief Exercise

10–1

Capitalized cost of the machine:

Purchase price $35,000

Note: Personal property taxes on the machine for the period after acquisition are

not part of acquisition cost. They are expensed in the period incurred.

Brief Exercise 10–2

Solutions Manual, Vol.1, Chapter 10 10–7

McGraw-Hill Education.

BRIEF EXERCISES

Capitalized cost of land:

Purchase price $600,000

Broker’s commission 30,000

All of the expenditures, including the costs to demolish the old building, are

included in the initial cost of the land.

Solutions Manual, Vol.1, Chapter 10 10–8

McGraw-Hill Education.

Brief Exercise 10–3

Cost of land and building:

Purchase price $600,000

The total must be allocated to the land and building based on their relative fair

values:

Asset Fair Value

Percent of Total

Fair Value

Initial

Valuation

(Percent ×

$639,000)

Solutions Manual, Vol.1, Chapter 10 10–9

McGraw-Hill Education.