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Question 10–1
Question 10–2
The cost of property, plant, and equipment and intangible assets includes the
Question 10–3
Question 10–4
Purchased intangibles are valued at their original cost to include the purchase
Chapter 10 Property, Plant, and Equipment and Intangible
Assets: Acquisition and Disposition
QUESTIONS FOR REVIEW OF KEY TOPICS
10–2 Intermediate Accounting, 8/e
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
Question 10–6
A lump-sum purchase price generally is allocated based on the relative fair values
Question 10–7
Question 10–8
Answers to Questions (continued)
Question 10–10
When an item of property, plant, and equipment is sold, a gain or loss is
Question 10–11
Question 10–12
Question 10–13
GAAP require the capitalization of interest incurred during the construction of
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
Question 10–15
Applying the specific interest method, the interest rate on any construction-
Question 10–16
GAAP defines research and development as follows:
Research is planned search or critical investigation aimed at discovery of new
Question 10–17
GAAP specifically excludes from current R&D expense the cost of property,
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
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
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
10–6 Intermediate Accounting, 8/e
Answers to Questions (concluded)
Question 10–21
Other than software development costs incurred after technological feasibility has
Question 10–22
The periodic amortization percentage for capitalized computer software
Question 10–23
Brief Exercise 10–1
Capitalized cost of the machine:
Purchase price $35,000
Brief Exercise 10–2
Capitalized cost of land:
Purchase price $600,000
BRIEF EXERCISES
10–8 Intermediate Accounting, 8/e
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 x
$639,000)
Land
$420,000
60%
$383,400
Brief Exercise 10–4
Cost of silver mine:
Acquisition, exploration, and development $5,600,000
Brief Exercise 10–5
After one year, the liability will increase to $455,456.
Brief Exercise 10–6
Calculation of goodwill:
Consideration exchanged $14,000,000
Brief Exercise 10–7
The initial value of equipment and note will be the present value of the note
payment:
PV = $60,000 (.85734* ) = $51,440
10–10 Intermediate Accounting, 8/e
Brief Exercise 10–8
Brief Exercise 10–9
Average PP&E for 2016 = ($740,000 + 940,000) ÷ 2 = $840,000
Brief Exercise 10–10
Proceeds $16,000
Less book value: Cost $80,000
Brief Exercise 10–11
Pickup trucks = Fair value of equipment plus cash paid
Brief Exercise 10–12
Pickup trucks = Fair value of equipment plus cash paid
10–12 Intermediate Accounting, 8/e
Brief Exercise 10–13
Brief Exercise 10–14
Average accumulated expenditures:
Interest capitalized:
* Weighted-average rate of all other debt:
10–14 Intermediate Accounting, 8/e
Brief Exercise 10–15
Average accumulated expenditures:
January 1, 2016 $500,000 x 12/12 = $ 500,000
Interest capitalized:
* Weighted-average rate of all other debt:
$ 700,000 x 7% = $ 49,000
Brief Exercise 10–16
Research and development:
Salaries $220,000
Exercise 10–1
Capitalized cost of land:
Purchase price $60,000
Capitalized cost of building:
Construction costs $500,000
Exercise 10–2
To record the purchase of equipment.
To record prepaid insurance for the equipment.
EXERCISES
10–16 Intermediate Accounting, 8/e
Exercise 10–3
Requirement 1
Cost of land and building:
Purchase price $4,000,000
Title search and insurance 16,000
Exercise 10–3 (concluded)
Requirement 2
Cost of land:
Purchase price $4,000,000
10–18 Intermediate Accounting, 8/e
Exercise 10–4
Requirement 1
Cost of copper mine:
Requirement 2
Copper mine (determined above) ..................................... 1,903,939
Exercise 10–5
Organization cost expense ($12,000 + 3,000) .................... 15,000
Exercise 10–6
Calculation of goodwill:
Exercise 10–7
Calculation of goodwill:
Consideration exchanged $11,000,000
Exercise 10–8
Percent of Total
Fair Value
Initial
Valuation
(Percent x
$900,000)
