29 Jun Question 1. On January 3, 2011,
Question
1. On January 3, 2011, Open, Inc. acquired land from Closed Company in a noncash transaction. Open, Inc. gave Closed Company 107,500 shares of its $1 par value common stock which currently trades on an organized exchange for $2.50 per share. The appraised value of the land is $245,000, and the land is recorded on Closed Company’s books at $197,500. Open, Inc. should record the land on its books at
Answer a. $268,750
b. $197,500
c. $107,500
d. $245,000
2. Vision, Inc. acquires a piece of land and a building by paying a lump sum. The controller of Vision, Inc. wants to “fudge” a little by allocating a disproportionately higher share of the purchase price to land. Which of the following is not among the reasons the controller would be suggesting this incorrect allocation of the purchase price?
Answer a. Higher income than if a correct allocation is made.
b. Reduced depreciation expense than if a correct allocation is made
c. Lower income taxes than if a correct allocation is made
d. Increased profit-sharing bonus than if a correct allocation is made.
3. RLM Corporation has a building it purchased in 2009 for $500,000. RLM depreciates this building straight-line over its estimated useful life of 10 years with no residual value. In late December 2011, the controller for RLM revised the building’s estimated useful life to a total of 18 years and estimated a $20,000 residual value at that time. How much depreciation should RLM record for the year ended December 31, 2011? (Round your intermediate calculations and final answer to the nearest dollar amount.)
a. $21,111
b. $25,000
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