Exercise 10–9
Requirement 1
Tractor ($5,000 cash + 18,783† present value of note) …………. 23,783
Requirement 2
Requirement 3
10–22 Intermediate Accounting, 8/e
Exercise 10–10
Land:
Purchase price $1,200,000
Building:
Architect’s fees $ 50,000
Equipment:
Purchase price $860,000
Land improvements:
Landscaping $45,000
Fork lifts:
Exercise 10–11
Requirement 1
To record the acquisition of land in exchange for common stock.
February 1, 2016
Land ……………………………………………………………………. 900,000
To record the acquisition of a building through purchase and donation.
November 2, 2016
Building ……………………………………………………………….. 6,000,000
Requirement 2
As with U.S. GAAP, the building would be valued at fair value. However, the
amount donated ($2,000,000) would not be recorded as revenue. Instead, IFRS
Exercise 10–12
Requirement 1
IFRS requires that government grants be recognized in income over the periods
necessary to match them on a systematic basis with the related costs that they are
Requirement 2
Alternative 1:
A correcting entry is necessary to eliminate the revenue recognized and reduce
the cost of the equipment:
Alternative 2:
A correcting entry is necessary to eliminate the revenue recognized and record
deferred income.
Exercise 10–13
Requirement 1
($ in thousands)
Average PP&E for 2014 = ($582,740 + 576,144) ÷ 2 = $579,442
Requirement 2
The fixed-asset turnover ratio indicates the level of sales generated by the
Exercise 10–14
Requirement 1
Cash …………………………………………………………………….. 3,000
Requirement 2
Cash …………………………………………………………………….. 10,000
10–26 Intermediate Accounting, 8/e
Exercise 10–15
Requirement 1
To record the sale of the patent.
July 15, 2016
Cash …………………………………………………………………….. 750,000
Exercise 10–16
Equipment—new ($200,000 + 60,000) …………………………. 260,000
Exercise 10–17
Equipment—new ($170,000 + 60,000) …………………………. 230,000
10–28 Intermediate Accounting, 8/e
Exercise 10–18
Requirement 1
Fair value of land + Cash given = Fair value of equipment
Requirement 2
Equipment ($150,000 + 10,000) …………………………………… 160,000
Exercise 10–19
Requirement 1
Fair value of land – Cash received = Fair value of equipment
Requirement 2
Equipment ($150,000 – 10,000) …………………………………… 140,000
Exercise 10–20
Requirement 1
Fair value of old land + Cash given = Fair value of new land
Requirement 2
Land—new ($72,000 + 14,000) …………………………………… 86,000
Requirement 3
Land—new ($30,000 + 14,000) …………………………………… 44,000
10–30 Intermediate Accounting, 8/e
Exercise 10–21
1. To record the purchase of equipment on account.
2. To record the acquisition of equipment in exchange for a note.
Equipment (determined below) ……………………………………. 24,545
3. To record the exchange of old equipment for new equipment.
Equipment—new ($2,500 + 22,000) …………………………….. 24,500
4. To record the acquisition of equipment by the issuance of stock.
Exercise 10–22
Requirement 1
The Codification topic number for nonmonetary transactions is FASB ASC 845:
Requirement 2
The specific citations that describe the required disclosures for nonmonetary
Requirement 3
An entity that engages in one or more nonmonetary transactions during a period shall
disclose in financial statements for the period all of the following:
a. The nature of the transactions
10–32 Intermediate Accounting, 8/e
Exercise 10–23
The FASB Accounting Standards Codification® represents the single source of
authoritative U.S. generally accepted accounting principles. The specific citation for
each of the following items is:
1. The disclosure requirements in the notes to the financial statements for
depreciation on property, plant, and equipment:
FASB ASC 360–10–50–1: “Property, Plant, and Equipment–Overall–Disclosure.”
Because of the significant effects on financial position and results of operations of
Exercise 10–23 (continued)
2. The criteria for determining commercial substance in a nonmonetary
exchange:
FASB ASC 845–10–30–4: “Nonmonetary Transactions–Overall–Initial
Measurement.”
A nonmonetary exchange has commercial substance if the entity’s future cash
10–34 Intermediate Accounting, 8/e
Exercise 10–23 (continued)
3. The disclosure requirements for interest capitalization:
FASB ASC 835–20–50–1: “Interest Capitalization–Overall–Disclosure.”
An entity shall disclose the following information with respect to interest cost in
Exercise 10–23 (concluded)
4. The elements of costs to be included as R&D activities:
FASB ASC 730–10–25–2: “Research & Development–Overall–Recognition.”
Elements of costs shall be identified with research and development activities as follows:
a. Materials, equipment, and facilities. The costs of materials (whether from the entity‘s
normal inventory or acquired specially for research and development activities) and
b. Personnel. Salaries, wages, and other related costs of personnel engaged in research
and development activities shall be included in research and development costs.
c. Intangible assets purchased from others. The costs of intangible assets that are
purchased from others for use in research and development activities and that have
alternative future uses (in research and development projects or otherwise) shall be
10–36 Intermediate Accounting, 8/e
Exercise 10–24
Average accumulated expenditures:
Interest capitalized:
$3,000,000
* Weighted-average rate of all other debt:
$2,000,000 x 9% = $180,000
Exercise 10–25
Average accumulated expenditures for 2016:
January 1, 2016 $500,000 x 12/12 = $ 500,000
Interest capitalized:
Exercise 10–26
Average accumulated expenditures for 2016:
January 1, 2016 $ 600,000 x 12/12 = $ 600,000
Interest capitalized:
$2,050,000
* Weighted-average rate of all other debt:
$5,000,000 x 12% = $600,000
Exercise 10–27
Average accumulated expenditures for 2016:
10–38 Intermediate Accounting, 8/e
July 1, 2016 $ 400,000 x 6/6 = $ 400,000
Interest capitalized in 2016:
Average accumulated expenditures for 2017:
January 1, 2017 ($1,600,000 + 19,200) $1,619,200 x 3/3 = $1,619,200
Interest capitalized in 2017:
Exercise 10–28
To expense R&D costs incorrectly capitalized.
Research and development expenditures:
Basic research to develop the technology $2,000,000
Engineering design work 680,000
10–40 Intermediate Accounting, 8/e
Exercise 10–29
Research and development expense:
Salaries and wages for lab research $ 400,000