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Bakersfield College ACG 2021 Use the following to answer questions 48 and 49: Horton Stores exchanged land and cash of $5,000 for similar land
Bakersfield College
ACG 2021
Use the following to answer questions 48 and 49:
Horton Stores exchanged land and cash of $5,000 for similar land. The book value and the fair value of the land were $90,000 and $100,000, respectively.
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- Bloomington Inc. exchanged land for equipment and $3,000 in cash. The book value and the fair value of the land were $104,000 and $90,000, respectively.
Bloomington would record equipment and a gain/(loss) of:
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Equipment |
Gain/(loss) |
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a. $ 87,000 |
$ 3,000. |
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b. $104,000 |
$ (5,000). |
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c. $ 87,000 |
$(14,000). |
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d. All of these answer choices are incorrect. |
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- P. Chang & Co. exchanged land and $9,000 cash for equipment. The book value and the fair value of the land were $106,000 and $90,000, respectively.
Chang would record equipment and a gain/(loss) of:
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Equipment |
Gain/(loss) |
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a. $ 99,000 |
$ (16,000). |
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b. $ 90,000 |
$ (25,000). |
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c. $108,000 |
$ 16,000. |
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d. $106,000 |
$ (9,000). |
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Use the following to answer questions:
Below is information relative to an exchange of similar assets by Grand Forks Corp. Assume the exchange has commercial substance.
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Old Equipment Book Value Fair Value |
Cash Paid |
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Case A |
$50,000 $60,000 |
$15,000 |
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Case B |
$40,000 $35,000 |
$ 8,000 |
- In Case A, Grand Forks would record the new equipment at: a. $65,000.
b. $75,000.
c. $50,000.
d. $60,000.
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- In Case B, Grand Forks would record a gain/(loss) of: a. $ 5,000.
b. $ 3,000.
c. $(5,000).
d. $(3,000).
Use the following to answer questions:
Below is information relative to an exchange of equipment by Pensacola Inc. Assume the exchange has commercial substance.
Old Equipment Cash Book Value Fair Value Received
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Case A |
$75,000 |
$80,000 |
$12,000 |
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Case B |
$60,000 |
$56,000 |
$10,000 |
- In Case A, Pensacola would record the new equipment at: a. $68,000.
b. $63,750.
c. $67,250.
d. $80,000.
- In Case B, Pensacola would record a gain/(loss) of: a. $ 4,000.
b. $ (4,000).
c. $ (10,000).
d. None of these answer choices are correct.
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- Interest may be capitalized:
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- On routinely manufactured goods as well as self-constructed assets.
- On self-constructed assets from the date an entity formally adopts a plan to build a discrete project.
- Whether or not there is specific borrowing for the construction.
- Whether or not there are actual interest costs incurred.
- Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately, when:
- The interest is incurred during the construction period of the asset.
- The asset is a discrete construction project for sale or lease.
- The asset is self-constructed, rather than acquired.
- All of these answer choices are correct.
- In computing capitalized interest, average accumulated expenditures:
- Is the arithmetic mean of all construction expenditures.
- Is determined by time-weighting individual expenditures made during the asset construction period.
- Is multiplied by the company's most recent financing rates.
- All of these answer choices are correct.
- Interest is not capitalized for:
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- Assets that are constructed as discrete projects for sale or lease.
- Assets constructed for a company’s own use.
- Inventories routinely and repetitively produced in large quantities.
- Interest is capitalized for all of these items.
- Average accumulated expenditures:
- Is an approximation of the average debt a firm would have outstanding if it financed all construction through debt.
- Is computed as a simple average if all construction expenditures are made at the end of the period.
- Are irrelevant if the company's total outstanding debt is less than total costs of construction.
- All of these answer choices are true statements.
- The cost of self-constructed fixed assets should:
- Include allocated indirect costs just as they are for production of products.
- Include only incremental indirect costs.
- Include only specifically identifiable indirect costs.
- Not include indirect costs.
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