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Homework answers / question archive / Bakersfield College ACG 2021 Use the following to answer questions: Horton Stores exchanged land and cash of $5,000 for similar land

Bakersfield College ACG 2021 Use the following to answer questions: Horton Stores exchanged land and cash of $5,000 for similar land

Accounting

Bakersfield College

ACG 2021

Use the following to answer questions:

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.

1

 

Land

Gain/(loss)

a.

$105,000

$       0.

b.

$105,000

$10,000.

c.

$ 95,000

$       0.

d.

$ 95,000

$10,000.

 
)Assuming that the exchange has commercial substance, Horton would record land-new and a gain/(loss) of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1.  

 

Land

Gain/(loss)

a.

$105,000

$       0.

b.

$105,000

$10,000.

c.

$ 95,000

$       0.

d.

$ 95,000

$10,000.

 
Assuming that the exchange lacks commercial substance, Horton would record land-new and a gain/(loss) of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. 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:

Equipment

Gain/(loss)

a.            $ 87,000

$     3,000.

b.            $104,000

$ (5,000).

c.             $ 87,000

$(14,000).

d.            All of these answer choices are incorrect.

 

  1. 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:

Equipment

Gain/(loss)

a.            $ 99,000

$ (16,000).

b.            $ 90,000

$ (25,000).

c.             $108,000

$     16,000.

d.            $106,000

$     (9,000).

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.

 

 

Old Equipment Book Value      Fair Value

Cash Paid

Case A

$50,000           $60,000

$15,000

Case B

$40,000           $35,000

$ 8,000
  1. In Case A, Grand Forks would record the new equipment at: a.         $65,000.

b.     $75,000.

c.     $50,000.

d.     $60,000.

 

 

  1. 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

Case A

$75,000

$80,000

$12,000

Case B

$60,000

$56,000

$10,000
  1. In Case A, Pensacola would record the new equipment at: a.         $68,000.

b.     $63,750.

c.     $67,250.

d.     $80,000.

 

 

 

 

 

 

  1. 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.

 

 

  1. Interest may be capitalized:

 

    1. On routinely manufactured goods as well as self-constructed assets.
    2. On self-constructed assets from the date an entity formally adopts a plan to build a discrete project.
    3. Whether or not there is specific borrowing for the construction.
    4. Whether or not there are actual interest costs incurred.

 

 

  1. Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately, when:
    1. The interest is incurred during the construction period of the asset.
    2. The asset is a discrete construction project for sale or lease.
    3. The asset is self-constructed, rather than acquired.
    4. All of these answer choices are correct.

 

 

 

  1. In computing capitalized interest, average accumulated expenditures:
    1. Is the arithmetic mean of all construction expenditures.
    2. Is determined by time-weighting individual expenditures made during the asset construction period.
    3. Is multiplied by the company's most recent financing rates.
    4. All of these answer choices are correct.

 

 

 

  1. Interest is not capitalized for:

 

    1. Assets that are constructed as discrete projects for sale or lease.
    2. Assets constructed for a company’s own use.
    3. Inventories routinely and repetitively produced in large quantities.
    4. Interest is capitalized for all of these items.

 

 

 

  1. Average accumulated expenditures:
    1. Is an approximation of the average debt a firm would have outstanding if it financed all construction through debt.
    2. Is computed as a simple average if all construction expenditures are made at the end of the period.
    3. Are irrelevant if the company's total outstanding debt is less than total costs of construction.
    4. All of these answer choices are true statements.

 

 

 

  1. The cost of self-constructed fixed assets should:
    1. Include allocated indirect costs just as they are for production of products.
    2. Include only incremental indirect costs.
    3. Include only specifically identifiable indirect costs.
    4. Not include indirect costs.

 

 

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