Bakersfield College

ACG 2021

1)Holiday Laboratories purchased a high-speed industrial centrifuge at a cost of $420,000. Shipping costs totaled $15,000. Foundation work to house the centrifuge cost $8,000. An additional water line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $6,000.

Materials used up in testing cost $3,000. The capitalized cost is:

a.     $455,000.

b.     $446,000.

c.     $437,000.

d.     $435,000.

 

 

2. Vijay Inc. purchased a three-acre tract of land for a building site for $320,000. On the land was a building with an appraised value of $120,000. The company demolished the old building at a cost of $12,000, but was able to sell scrap from the building for $1,500. The cost of title insurance was

$900 and attorney fees for reviewing the contract were $500. Property taxes paid were $3,000, of which $250 covered the period subsequent to the purchase date. The capitalized cost of the land is:

a.     $336,400.

b.     $336,150.

c.     $334,650.

d.     $201,150.

 

 

 

3. Juliana Corporation purchased all of the outstanding stock of Caldwell Inc., paying $2,700,000 cash. Juliana assumed all of the liabilities of Caldwell. Book values and fair values of acquired assets and liabilities were:

 

	Book Value		Fair Value
Current assets (net)	$420,000		$450,000
Property, plant, & equip. (net)	1,600,000		2,250,000
Liabilities	500,000		600,000
Juliana would record goodwill of: a.     $1,180,000. b.     $ 600,000. c.     $ 880,000. d.     $ 100,000.

 

 

4. Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950,000 cash. Lake assumed all of the liabilities of Huron. Book values and fair values of acquired assets and liabilities were:

 

 

	Book Value	Fair Value
Current assets (net)	$130,000	$125,000
Property, plant, equip. (net)	600,000	750,000
Liabilities	150,000	175,000
Lake would record goodwill of: a.     $ 0. b.     $ 75,000. c.     $445,000. d.     $250,000.

 

 

 

5. On July 1, 2016, Larkin Co. purchased a $400,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2016 as follows:

 

Demolition of existing building on site	$75,000
Legal and other fees to close escrow	12,000
Proceeds from sale of demolition scrap	10,000

 

What would be the balance in the land account as of December 31, 2016? a.         $400,000.

b.     $475,000.

c.     $477,000.

d.     $487,000.

 

 

 

6. Assets acquired in a lump-sum purchase are valued based on:
   1. Their assessed valuation.
   2. Their relative fair values.
   3. The present value of their future cash flows.
   4. Their cost plus the difference between their cost and fair values.

 

 

 

 

7. Simpson and Homer Corporation acquired an office building on three acres of land for a lump- sum price of $2,400,000. The building was completely furnished. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and furniture and fixtures, respectively. The initial values of the building, land, and furniture and fixtures would be:

 

Building	Land	Fixtures
a.     $1,300,000	$ 780,000	$520,000
b.     $1,200,000	$ 720,000	$480,000
c.     $ 720,000	$1,200,000	$480,000

d.     None of these answer choices are correct.

 

 

 

 

 

 

8. Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,000,000. The building included used but functional equipment. According to independent appraisals, the fair values were $4,500,000, $3,000,000, and $2,500,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be:

 

Building                Land            Equipment

a.     $4,500,000        $3,000,000     $2,500,000

b.     $4,500,000        $3,000,000     $ 500,000

c.     $3,600,000        $2,400,000     $2,000,000

d.     None of these answer choices are correct.

 

 

 

 

 

 

 

9. Assets acquired under multi-year deferred payment contracts are:
   1. Valued at their fair value on the date of the final payment.
   2. Valued at the present value of the payments required by the contract.
   3. Valued at the sum of the payments required by the contract.
   4. None of these answer choices are correct.

 

 

 

10. Assets acquired by the issuance of equity securities are valued based on:
    1. Their fair values.
    2. The fair value of the equity securities.
    3. A or B, whichever is more reasonably determinable.
    4. A or B, whichever is smaller.

 

 

 

 

11. Donated assets are recorded at:
    1. Zero (memo entry only).
    2. The donor's book value.
    3. The donee's stated value.
    4. Fair value.

 

 

 

 

12. The fixed-asset turnover ratio provides:
    1. The rate of decline in asset lives.
    2. The rate of replacement of fixed assets.
    3. The amount of sales generated per dollar of fixed assets.
    4. The decline in book value of fixed assets compared to capital expenditures.

 

 

 

 

13. The balance sheets of Davidson Corporation reported net fixed assets of $320,000 at the end of 2016. The fixed-asset turnover ratio for 2016 was 4.0, and sales for the year totaled $1,480,000. Net fixed assets at the end of 2015 were:

a.     $470,000.

b.     $370,000.

c.     $420,000.

d.     None of these answer choices are correct.

 

 

 

14. The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at:
    1. Fair value of the asset(s) given up.
    2. The book value of the asset given plus any cash or other monetary consideration received.
    3. Fair value or book value, whichever is smaller.
    4. Book value of the asset given.

 

 

 

15. In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if:
    1. The fair value of the equipment received exceeds the book value of the equipment received.
    2. The book value of the equipment received exceeds the fair value of the equipment given up.
    3. The fair value of the equipment surrendered exceeds the book value of the equipment given up.
    4. None of these answer choices are correct.

 

 

 

 

Use the following to answer questions:

 

Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively.

 

16. Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of: a.         $26,000.

b.     $ 8,000.

c.     $(8,000).

d.     $          0.