Intermediate Accounting 19th Edition Earl K Stice James D Stice

Intermediate Accounting 19e Earl K Stice James D Stice

ISBN-10:1133957919 , ISBN-13:978-1133957911

Chapter 10—Investments in Noncurrent Working Property-Acquisition

MULTIPLE CHOICE

On-Name Service Company purchased a constructing lot to assemble a brand new company workplace constructing. An older dwelling on the constructing lot was razed instantly in order that the workplace constructing could possibly be constructed. The price of buying the older dwelling needs to be
a.

recorded as a part of the price of the land.

b.

written off as a loss within the yr of buy.

c.

written off as a unprecedented merchandise within the yr of buy.

d.

recorded as a part of the price of the brand new constructing.

ANS: A PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

The time period “intangible property” is utilized in accounting to indicate
a.

present or noncurrent property gadgets with out bodily traits.

b.

property with lesser financial significance due to the character of such property.

c.

such gadgets as patents, copyrights, and claims in opposition to clients which may be valued on a financial foundation.

d.

properties with out bodily traits which have long-term results on a enterprise enterprise.

ANS: D PTS: 1 DIF: Straightforward OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Which of the next intangible property does NOT have the attribute of exchangeability?
a.

Patent

b.

Copyright

c.

Goodwill

d.

Franchise

ANS: C PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Reflective Pondering

In a enterprise mixture, goodwill is outlined as the surplus of value over the
a.

internet e book worth of property acquired.

b.

truthful worth of property acquired.

c.

e book worth of property acquired much less the liabilities assumed.

d.

truthful worth of property acquired much less the liabilities assumed.

ANS: D PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Reflective Pondering

Goodwill needs to be recorded within the accounting information solely when
a.

it’s bought from one other firm.

b.

it may be established {that a} particular profit or benefit has resulted to a agency from some merchandise equivalent to a great title, succesful workers, or status.

c.

it’s acquired by means of the acquisition of one other enterprise entity.

d.

a agency studies above regular earnings for 5 or extra consecutive years.

ANS: C PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Donated gear for which the truthful worth has been decided needs to be recorded as a debit to the suitable gear account and a credit score to
a.

Different Earnings.

b.

Retained Earnings.

c.

Capital Inventory.

d.

Income or Acquire.

ANS: D PTS: 1 DIF: Straightforward OBJ: LO 2

TOP: AICPA FN-Reporting MSC: AACSB Reflective Pondering

Shorecrest Firm not too long ago accepted a donation of land with a good worth of $250,000 from town of Sutton in return for a promise to construct a plant in Sutton.
The entry that Shorecrest ought to use to document this land is:

a.

Land………………………… 250,000

Donated Capital-Land 250,000

b.

Land………………………… 250,000

Acquire from Receipt of Donated Land 250,000

c.

Land………………………… 250,000

Unrealized Acquire from Receipt of

Donated Land……………… 250,000

d.

Land………………………… 250,000

Retained Earnings……………. 250,000

ANS: A PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Cirrus Inc. bought sure plant property below a deferred fee contract. The settlement was to pay $40,000 per yr for ten years. The plant property needs to be valued at
a.

$400,000.

b.

$400,000 plus imputed curiosity.

c.

current worth of $40,000 annuity for ten years at an imputed rate of interest.

d.

future worth of $40,000 annuity for ten years at an imputed rate of interest.

ANS: C PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

An asset is being constructed for an enterprise’s personal use. The asset has been financed with a selected new borrowing. The curiosity value incurred in the course of the building interval because of expenditures for the asset is
a.

part of the historic value of buying the asset to be written off over the estimated helpful lifetime of the asset.

b.

curiosity expense within the building interval.

c.

recorded as a deferred cost and amortized over the time period of the borrowing.

d.

part of the historic value of buying the asset to be written off over the time period of the borrowing used to finance the development of the asset.

ANS: A PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

If the price of odd repairs is capitalized as an addition to the constructing account in the course of the present yr,
a.

internet revenue for the present yr will likely be understated.

b.

stockholders’ fairness on the finish of the present yr will likely be understated.

c.

whole property on the finish of the present yr won’t be affected.

d.

whole liabilities on the finish of the present yr won’t be affected.

ANS: D PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

An organization bought land for use as the location for the development of a plant. Timber was lower from the constructing website in order that building of the plant might start. The proceeds from the sale of the timber needs to be
a.

categorized as different revenue.

b.

deducted from the price of the land.

c.

deducted from the price of the plant.

d.

netted in opposition to the prices to clear the land and expensed as incurred.

ANS: B PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

When an organization purchases land with a constructing on it and instantly tears down the constructing in order that the land can be utilized for the development of a plant, the prices incurred to tear down the constructing needs to be
a.

amortized over the estimated time interval between the tearing down of the constructing and the completion of the plant.

b.

expensed as incurred.

c.

added to the price of the plant.

d.

added to the price of the land.

ANS: D PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

A donated plant asset for which the truthful worth has been decided, and for which incidental prices had been incurred in acceptance of the asset, needs to be recorded at an quantity equal to its
a.

incidental prices incurred.

b.

truthful worth and incidental prices incurred.

c.

e book worth on books of donor and incidental prices incurred.

d.

e book worth on books of donor.

ANS: B PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

In accordance with SFAS No. 34, “Capitalization of Curiosity Price,” curiosity needs to be capitalized for property which might be
a.

in use or prepared for his or her supposed use within the earnings actions of the enterprise.

b.

being constructed or in any other case being produced as discrete tasks for an enterprise’s personal use.

c.

not getting used within the earnings actions of the enterprise and that aren’t present process the actions essential to get them prepared to be used.

d.

routinely produced on a repetitive foundation for stock however require an prolonged time frame for completion.

ANS: B PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

An organization is setting up an asset for its personal use. Development started in 2013. The asset is being financed completely with a selected new borrowing. Development expenditures had been made in 2013 and 2014 on the finish of every quarter. The overall quantity of curiosity value capitalized in 2014 needs to be decided by making use of the rate of interest on the particular new borrowing to the
a.

whole collected expenditures for the asset in 2014.

b.

common collected expenditures for the asset in 2014.

c.

common expenditures for the asset in 2014.

d.

whole expenditures for the asset in 2014.

ANS: B PTS: 1 DIF: Difficult OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Which of the next analysis and growth associated prices needs to be capitalized and amortized over present and future intervals?
a.

Labor and materials prices incurred in constructing a prototype mannequin.

b.

Price of testing gear that may even be utilized in one other separate analysis and growth undertaking scheduled to start subsequent yr.

c.

Administrative salaries allotted to analysis and growth.

d.

Analysis findings bought from one other firm to help a specific analysis undertaking presently in course of.

ANS: B PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Which of the next ideas finest describes the present technique of accounting for analysis and growth prices?
a.

Instant recognition as an expense

b.

Systematic and rational allocation

c.

Earnings tax minimization

d.

Associating trigger and impact

ANS: A PTS: 1 DIF: Straightforward OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

If an organization constructs a laboratory constructing for use as a analysis and growth facility, the price of the laboratory constructing is matched in opposition to earnings as
a.

analysis and growth expense within the interval(s) of building.

b.

depreciation deducted as a part of analysis and growth prices.

c.

depreciation or instant write-off relying on firm coverage.

d.

an expense at such time as productive analysis and growth has been obtained from the ability.

ANS: B PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

When an organization replaces an outdated asphalt roof on its plant with a brand new fiberglass insulated roof, which of the next kinds of expenditure has occurred?
a.

Unusual repairs and upkeep

b.

Addition

c.

Rearrangement

d.

Betterment

ANS: D PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

An enchancment made to a machine elevated its truthful market worth and its manufacturing capability by 25 % with out extending the machine’s helpful life. The price of the advance needs to be
a.

expensed.

b.

debited to Amassed Depreciation.

c.

capitalized within the machine account.

d.

allotted between Amassed Depreciation and the machine account.

ANS: C PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Which of the next is true?
a.

The Monetary Accounting Requirements Board has by no means permitted the disclosure of the truthful values of noncurrent working property within the notes to monetary statements.

b.

The SEC presently requires the disclosure of the truthful values of noncurrent working property within the notes to monetary statements of firms which might be registered with the SEC.

c.

The Monetary Accounting Requirements Board presently requires the disclosure of the truthful values of noncurrent working property within the notes to the monetary statements.

d.

Disclosure of the truthful values of noncurrent working property within the notes to the monetary statements is presently inspired however not required by the Monetary Accounting Requirements Board.

ANS: D PTS: 1 DIF: Medium OBJ: LO 5

TOP: AICPA FN-Measurement MSC: AACSB Analytic

A machine with an authentic estimated helpful lifetime of ten years is moved to a different location within the manufacturing unit after it had been in service for 3 years. The effectivity of the machine is elevated for its remaining helpful life. The reinstallation prices needs to be capitalized if the remaining helpful lifetime of the machine is
5 Years Ten Years

a.

No No

b.

No Sure

c.

Sure Sure

d.

Sure No

ANS: C PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

An expenditure subsequent to acquisition of assembly-line manufacturing gear advantages future intervals. The expenditure needs to be capitalized if it’s a
Betterment Rearrangement

a.

Sure Sure

b.

Sure No

c.

No Sure

d.

No No

ANS: A PTS: 1 DIF: Medium OBJ: LO 3

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Which of the next ideas is commonly given as justification to not worth noncurrent working property at their present values?
a.

The income precept

b.

Verifiability

c.

Relevance

d.

Predictive worth

ANS: B PTS: 1 DIF: Straightforward OBJ: LO 5

TOP: AICPA FN-Measurement MSC: AACSB Analytic

On February 12, Oceans Firm bought a tract of land as a manufacturing unit website for $190,000. An current constructing on the property was razed and building was begun on a brand new manufacturing unit constructing in March of the identical yr. Further information can be found as follows:
Price of razing outdated constructing ……………………..

$ 55,000

Title insurance coverage and authorized charges to buy land ……

7,500

Architect’s charges ……………………………….

52,500

New constructing building value …………………..

975,000

The recorded value of the finished manufacturing unit constructing needs to be

a.

$1,165,000

b.

$1,220,000

c.

$1,027,500

d.

$1,082,500

ANS: C PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

The Morris Company acquired land, buildings, and gear from a bankrupt firm at a lump-sum value of $180,000. On the time of acquisition, Morris paid $12,000 to have the property appraised. The appraisal disclosed the next values:
Land …………………………………………..

$120,000

Buildings ………………………………………

80,000

Tools ………………………………………

40,000

What value needs to be assigned to the land, buildings, and gear, respectively?

a.

$64,000, $64,000, and $64,000

b.

$90,000, $60,000, and $30,000

c.

$96,000, $64,000, and $32,000

d.

$120,000, $80,000, and $40,000

ANS: C PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Osborne Firm acquired three machines for $200,000 in a package deal deal. The three property collectively had a e book worth of $160,000 on the vendor’s books. An appraisal costing the purchaser $2,000 indicated that the three machines had the next market values (e book values are given in parentheses):
Machine 1: $60,000 ($40,000)

Machine 2: $80,000 ($50,000)

Machine 3: $100,000 ($70,000)

The three property needs to be individually recorded at a price of (rounded to the closest greenback)

Machine 1 Machine 2 Machine 3

a.

$40,000 $53,333 $66,667

b.

$50,000 $62,500 $87,500

c.

$40,000 $50,000 $70,000

d.

$50,500 $67,333 $84,167

ANS: D PTS: 1 DIF: Difficult OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Diamond, Inc. bought a machine below a deferred fee contract on December 31, 2013. Underneath the phrases of the contract, Diamond is required to make eight annual funds of $140,000 every starting December 31, 2014. The suitable rate of interest is 8 %. The acquisition value of the machine is
a.

$1,389,190.

b.

$1,120,000.

c.

$868,900.

d.

$804,530.

ANS: D PTS: 1 DIF: Difficult OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

On October 1, Azuma, Inc. exchanged 8,000 shares of its $25 par worth widespread inventory for a parcel of land to be held for a future plant website.Azuma’s widespread inventory had a good market worth of $80 per share on the trade date. Azuma obtained $36,000 from the sale of scrap when an current constructing on the location was razed. The land needs to be carried at
a.

$200,000.

b.

$236,000.

c.

$604,000.

d.

$640,000.

ANS: C PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Broham Manufacturing Firm bought a machine on January 2, 2014. The bill value of the machine was $40,000, and the seller supplied a 2 % low cost for fee inside ten days. The next further prices had been incurred in reference to the machine:
Transportation-in ………………………………

$1,200

Set up value ………………………………

700

Testing prices previous to common operation ………….

550

If the bill is paid inside the low cost interval, Broham ought to document the acquisition value of the machine at

a.

$41,650.

b.

$41,100.

c.

$40,400.

d.

$39,200.

ANS: A PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

The overall ledger of the Flybird Company as of December 31 contains the next accounts:
Group prices ……………………………..

$ 20,000

Deposits with promoting company (will likely be used to

promote goodwill) …………………………….

32,000

Low cost on bonds payable ……………………….

60,000

Extra of value over e book worth of internet property of

acquired subsidiary …………………………..

280,000

Emblems …………………………………….

48,000

Within the preparation of Flybird’s stability sheet as of December 31, what needs to be reported as whole intangible property?

a.

$68,000

b.

$328,000

c.

$368,000

d.

$380,000

ANS: B PTS: 1 DIF: Difficult OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

On June 30, 2014, Diode Inc. bought for money at $50 per share all 150,000 shares of excellent widespread inventory of Moore Firm. Moore’s stability sheet at June 30, 2014, confirmed internet property with a e book worth of $6,000,000. The truthful worth of Moore’s property, plant, and gear on June 30, 2014, was $800,000 in extra of its e book worth. What quantity, if any, will likely be recorded by Diode as goodwill on the date of buy?
a.

$0

b.

$700,000

c.

$800,000

d.

$1,500,000

ANS: B PTS: 1 DIF: Medium OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

On July 31, 2014, Mason Firm bought for $4,000,000 money all the excellent widespread inventory of Turquoise Firm when Turquoise’s stability sheet confirmed internet property of $3,200,000. Turquoise’s property and liabilities had truthful values totally different from the e book values as follows:
E book Worth

Truthful Worth

Property, plant, and gear,

internet ………………………

$5,000,000

$5,750,000

Different property ………………..

500,000

0

Lengthy-term debt ………………

3,000,000

2,800,000

On account of the transaction, what quantity will likely be proven as goodwill within the July 31, 2014, consolidated stability sheet of Mason Firm and its wholly owned subsidiary, Turquoise Firm?

a.

$350,000

b.

$250,000

c.

$750,000

d.

$800,000

ANS: A PTS: 1 DIF: Difficult OBJ: LO 1

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Place Firm began building of a brand new workplace constructing on January 1, 2014, and moved into the completed constructing on July 1, 2015. Of the constructing’s $5,000,000 whole value, $4,000,000 was incurred in 2014 evenly all year long. Place’s incremental borrowing price was 12 % all through 2014, and the whole quantity of curiosity incurred by Place throughout 2014 was $204,000. What quantity ought to Place report as capitalized curiosity at December 31, 2014?
a.

$480,000

b.

$300,000

c.

$240,000

d.

$204,000

ANS: D PTS: 1 DIF: Medium OBJ: LO 2

TOP: AICPA FN-Measurement MSC: AACSB Analytic

Sonora Firm borrowed $400,000 on a ten % observe payable to finance a brand new warehouse Sonora is setting up for its personal use. The one different debt on Sonora’s books is a $600,000, 12 % mortgage payable on an workplace constructing. On the finish of the present yr, common collected expenditures on the brand new warehouse totaled $475,000. Sonora ought to capitalize curiosity for the present yr within the quantity of
a.

$40,000.

b.

$47,500.

c.

$49,000.

d.

$52,250.

ANS: C PTS: 1 DIF: Medium OBJ: LO 2

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