11 May On January 15, 2013, Talbot Corporation
Question
On January 15, 2013, Talbot Corporation
1. Corresponds to CLO 1(a)
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
Question 2.2. 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
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