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Exam 10: Investments in Noncurrent Operating Assets-Acquisition

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Question 41

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Trade secrets are an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

A) Marketing-related
B) Customer-related
C) Artistic-related
D) Technology-based

E) A) and B)
F) A) and C)

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Question 42

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The 2014 annual report of Stainless Steel disclosed the following information relating to the company's construction projects,debt,and interest cost (in thousands of dollars): Construction in progress (relating to a component of property,plant,and equipment)increased from $63,889 to $80,876 in 2014. Interest capitalized in 2014 of $5,674 was disclosed in the footnotes of the company's financial statements. Interest-bearing debt outstanding at the end of 2013: $190,000 of 9.5 percent notes,$135,000 of 11.125 percent notes,and $32,350 relating to a line of credit with an interest rate of 9%. Required: Based on the information provided in the annual report,estimate the amount of interest to be capitalized in 2014.Give reasons why your estimate differs from the amount reported by the company.Assume that the construction payments were made uniformly during the year.

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2014 interest cost,based on interest-bea...

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Question 43

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Assets constructed for a firm's own use present the problem of whether to capitalize interest on the funds invested during the time required to prepare the assets for their intended use.Current generally accepted accounting principles as specified by the FASB in Statement No.34 require the capitalization of interest on borrowed capital,but not to exceed the total interest paid by the firm. Evaluate the appropriateness of the approach currently required in the professional pronouncements now in effect.

Order backlogs are an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

When a company replaces an old asphalt roof on its plant with a new fiberglass insulated roof,which of the following types of expenditure has occurred?

Osborne Company acquired three machines for $200,000 in a package deal.The three assets together had a book value of $160,000 on the seller's books.An appraisal costing the purchaser $2,000 indicated that the three machines had the following market values (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 assets should be individually recorded at a cost of (rounded to the nearest dollar)

Broadcast rights are an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

Torrent Lumber shows the following balances in its financial records: Prepare a partial balance sheet and income statement using the information provided above.

Tundra Co.incurred research and development costs in 2014 as follows: The total research and development costs charged in Tundra's 2014 income statement should be

Shorecrest Company recently accepted a donation of land with a fair value of $250,000 from the city of Sutton in return for a promise to build a plant in Sutton. The entry that Shorecrest should use to record this land is:

An asset is being constructed for an enterprise's own use.The asset has been financed with a specific new borrowing.The interest cost incurred during the construction period as a result of expenditures for the asset is

In a business combination,goodwill is defined as the excess of cost over the

Which of the following best describes the approach prescribed in IAS 38,"Intangible Assets"?

Bluesy Company acquired land and paid for it in full by issuing $700,000 of its 10 percent bonds payable and 40,000 shares of its common stock,par $10.The stock was selling at $21 per share and the bonds were trading at 102.What amount should Bluesy record as the cost of the land?

Which of the following research and development related costs should be capitalized and amortized over current and future periods?

Which of the following most accurately describes the position taken by current generally accepted accounting principles?

On June 30,2014,Diode Inc.purchased for cash at $50 per share all 150,000 shares of outstanding common stock of Moore Company.Moore's balance sheet at June 30,2014,showed net assets with a book value of $6,000,000.The fair value of Moore's property,plant,and equipment on June 30,2014,was $800,000 in excess of its book value.What amount,if any,will be recorded by Diode as goodwill on the date of purchase?

Dupe Industries purchased the net assets of Sort Company for $1,100,000 cash .A schedule of the net assets of Sort Company,as recorded on Sort Company's books at the time of the acquisition,is as follows: The following schedule shows the differences between the recorded costs and market values of the assets of Sort Company at the date of the acquisition: Prepare the journal entry to record this acquisition using the acquisition method prescribed by SFAS 141R,,"Business Combinations."

Ericton Enterprises Inc.developed a new machine for manufacturing baseballs.Because the machine is considered very valuable,the company had it patented.The following expenditures were incurred in developing and patenting the machine. Ericton elected to amortize the patent over its legal life.At the beginning of the second year,Ericton Enterprises paid $24,000 to successfully defend the patent in an infringement suit.At the beginning of the fourth year Ericton determined that the remaining estimated useful life of the patent was five years. Record the above transactions in general journal form for Ericton Enterprises Inc.for the first five years of the life of the patent.Include any amortization or depreciation for each period.

When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant,the costs incurred to tear down the building should be