29 Jun Question 1 On January 15, 2013, Talbot Corporation purchas
Question
1
On January 15, 2013, Talbot Corporation purchased a parcel of land as a factory site for $425,000. An old building on the property was demolished, and construction began on a new building which was completed on November 31, 2013. Salvaged materials resulting from the demolition were sold for $12,000. Costs incurred during this period included: Demolition of old building, $35,000, Architect’s fees, $15,000, Legal fees for title investigation and purchase contract, $7,000, and Construction costs, $980,000. Talbot should record the cost of the land and new building, respectively, as (Points : 7)
$425,000 and $980,000
$455,000 and $995,000
$460,000 and $995,000
$460,000 and $983,000
2. Corresponds to CLO 1(b)
Which of the following costs should be fully expensed in the period in which the expenditure is made? (Points : 7)
An outlay made to increase the efficiency of an existing plant asset.
An outlay made to maintain an existing asset in operating condition.
An outlay made to extend the useful life of an existing asset.
None of the above costs should be fully expensed immediately; all should be capitalized.
Question 3.3. Corresponds to CLO 1(c)
On January 2, 2013, Apple Valley Produce began construction of a new processing plant. The plant was expected to be finished and ready for use on September 30, 2014. Expenditures for construction during 2013 were as follows: January 2, 2013, $600,000, July 1, 2013, $800,000, and December 31, 2013, $900,000. To fund this project, on January 2, 2013, Apple Valley borrowed $1,800,000 on a construction loan at 10% interest. This loan was outstanding during the construction period. The company also had $5,000,000 in 9% bonds outstanding in 2013. The interest capitalized for 2013 should be: (Points : 7)
$90,000
$180,000
$107,500
$100,000
4. On March 1, 2004, Tucker Corporation purchased a new machine for $355,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $19,000. The company has recorded monthly depreciation using the straight-line method. On July 1, 2013, the machine was sold for $45,000. What gain should be recognized from the sale of the machine? (Points : 7)
$21,333
$3,600
$2,800
$19,000
5. Corresponds to CLO 2(a)
On July 2, 2013, Peak Power Corporation purchased machinery for $80,000. Salvage value was estimated to be $5,000. The machinery will be depreciated over ten years using the double-declining balance method. If depreciation is computed on the basis of the nearest full month, Peak Power should record depreciation expense on this machinery for 2014 of (Points : 7)
$14,400
$13,500
$8,000
$7,500
Question 6.6. Corresponds to CLO 2(b)
At the beginning of 2013, Brennan Corporation purchased a delivery truck for $80,000. The truck was estimated to have a useful life of 150,000 miles and a salvage value of $5,000. It was driven 29,000 miles in 2013 and 33,000 miles in 2014. What is the depreciation expense for 2014? (Points : 7)
$14,500
$15,467
$16,500
$17,600
Question 7.7. Corresponds to CLO 2(c)
Volmer Corporation owns machinery with a book value of $400,000. It is estimated that the machinery will generate future cash flows of $375,000. The machinery has a fair value of $325,000. Volmer should recognize a loss on impairment of (Points : 7)
$ -0-
$25,000
$50,000
$75,000
8. Corresponds to CLO 2(d)
Plymouth Mining Corporation acquired, for $5,500,000, a tract of land containing an extractable natural resource. Geological surveys estimate that the recoverable reserves will be 1,000,000 tons. Plymouth is required by its purchase contract to restore the land at an estimated cost of $750,000. The land is expected to have a value of $1,250,000 after restoration. Plymouth maintains no inventories of extracted materials. What is the amount of depletion per ton? (Points : 7)
$4.25
$5.00
$5.50
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