Exercise 10–30
Requirement 1
According to U.S. GAAP, the following costs would be expensed as R&D:
Requirement 2
10–42 Intermediate Accounting, 8/e
Exercise 10–31
Requirement 1
NXS should expense only the research expenditures:
Requirement 2
Exercise 10–32
List A List B
f 1. Depreciation a. Exclusive right to display a word, a symbol,
or an emblem.
Exercise 10–33
Requirement 1
Requirement 2
(1) Percentage-of-revenue method:
Exercise 10–34
Requirement 1
2016:
Requirement 2
(1) Percentage-of-revenue method:
(2) Straight-line method:
10–46 Intermediate Accounting, 8/e
Exercise 10–35
Requirement 1
Requirement 2
CPA / CMA REVIEW QUESTIONS
CPA Exam Questions
1. d. Simons Company should value the land at $170,500. All expenditures
3. d. There are eight payments due, the first one due immediately, and the
remaining seven due each year on December 31. Therefore, the correct
4. b. The recorded cost of the new asset is equal to the fair value of the asset
5. c. Dahl Corporation should capitalize the materials, engineering fees, and labor
10–48 Intermediate Accounting, 8/e
CPA Exam Questions (concluded)
6. b. The interest cost capitalized is the lesser of the formula amount based on
7. a. Amortization of capitalized software is the greater of the amount calculated
using the percentage–of-revenue method and the straight-line method. In
8. d. All of the expenditures are considered research and development.
CMA Exam Questions
1. a. The costs of fixed assets (plant and equipment) are all costs necessary to
acquire these assets and to bring them to the condition and location required
2. d. GAAP states that the basic principle to be followed in these exchanges is to
value the asset received at fair value and to recognize gain or loss (the
3. c. The answer is the same as question 2.
Problem 10–1
1. To record the acquisition of land and building.
Land (determined below) ……………………………………………………………… 62,500
Asset
Fair Value
Percent of Total
Fair Value
Initial
Valuation
(Percent x
$100,000)
Land
$ 75,000
62.5%
$ 62,500
Building
37.5
$120,000
100.0%
$100,000
2. To record the acquisition of equipment for cash and a note.
Equipment (determined below) ……………………………………. 37,037
Present value of note payments:
3. To record the acquisition of a truck by donation.
10–50 Intermediate Accounting, 8/e
Problem 10–1 (concluded)
4. To capitalize organization costs.
5. To record the purchase of equipment.
6. To record the acquisition of office equipment by the issuance of common
stock.
7. To record the acquisition of land in exchange for cash and a note.
Problem 10–2
Requirement 1
BLACKSTONE CORPORATION
Land Account (Site Number 11)
As of September 30, 2017
Acquisition cost $600,000
Requirement 2
BLACKSTONE CORPORATION
Capitalized Cost of Office Building
As of September 30, 2017
Contract cost $3,000,000
Plans, specifications, and blueprints 12,000
10–52 Intermediate Accounting, 8/e
Problem 10–3
Requirement 1
PELL CORPORATION
Analysis of Changes in Plant Assets
For the Year Ended December 31, 2016
Balance Balance
12/31/15 Increase Decrease 12/31/16
Land $ 350,000 $438,000 [1] $ 788,000
Explanation of Amounts:
[1] Cost of land acquired 11/1/16:
Problem 10–3 (concluded)
Requirement 2
Pell Corporation
Gain or Loss from Plant Asset Disposals
For the Year Ended December 31, 2016
Sale of machine on 3/31/16:
Selling price $36,500
10–54 Intermediate Accounting, 8/e
Problem 10–4
To reclassify various expenditures incorrectly charged to the intangible asset
account.
Organization cost expense ………………………………………. 7,000
Prepaid insurance …………………………………………………… 6,000
Problem 10–5
1. To expense R&D costs.
Research and development expense …………………………. 12,000
Cash …………………………………………………………………. 12,000
2. To expense legal fees for unsuccessful defense of patent.
3. To capitalize the cost of equipment.
4. To capitalize cost of the sprinkler system.
5. To capitalize legal fees for successful defense of patent.
10–56 Intermediate Accounting, 8/e
Problem 10–5 (concluded)
6. To record the trade-in of an old machine for a new machine.
Machine—new ($2,000* + 8,000) ……………………………….. 10,000
Problem 10–6
Southern Company:
Cash …………………………………………………………………….. 140,000
Eastern Company:
The fair value of Eastern’s building is $1,260,000 ($1,400,000 fair value of
Southern’s building less $140,000 cash given).
10–58 Intermediate Accounting, 8/e
Problem 10–7
Robers:
Cash ……………………………………………………………………… 5,000
Phifer:
New equipment ($70,000 + 5,000) ………………………………. 75,000
Problem 10–8
Case A.
Requirement 1
Book value less fair value = loss on exchange
Requirement 2
Fair value less book value = gain on exchange
10–60 Intermediate Accounting, 8/e
Problem 10–8 (continued)
Case B.
Requirement 1
Fair value less book value = gain on exchange
Requirement 2