28 May Question 1 On January 15, 2013, Talbot Corporation purchase
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) |
An outlay made to increase the efficiency of an existing plant asset. |
| 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 |
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