Reference no: EM133061130
Questions -
Q1. Stella Inc. purchased land and incurred the following costs related to building construction on August 1, 20X1.
Purchase price $185,000
Title insurance 1,500
Legal fees to purchase land 1,000
Cost of razing old building on lot 8,500
Proceeds from sale of salvageable materials 1,200
Property taxes ($2,000 of this amount is for period after the purchase) 5,000
Cost of grading land for building construction 9,000
Cost of building construction 620,000
Landscaping cost ($3,000 of this amount is maintenance contract for the next 1 year) 13,000
Cost of constructing driveway 8,000
Cost of parking lot and fencing 15,000
Ground-breaking ceremony (food/supplies) 2,100
Interest on construction loan 12,000
Installation of a sprinkler system 7,000
How much is the cost of land improvement?
a. $40,000
b. $36,000
c. $43,000
d. $42,100
Q2. On July 1, 20X1, Macrosoft began developing an anti-hacker software program. Technological feasibility was established on February 1, 20X2, and the program was available for release on March 31, 20X2. Development costs were incurred as follows:
July 1 through December 31, 20X1 $6,300,000
January 1 through January 31, 20X2 1,200,000
February 1 through March 31, 20X2 1,600,000
How much of these software development costs should be capitalized as an asset, and how much should be R&D expenses?
a. $2,800,000 asset, and $6,300,000 R&D expenses
b. $7,500,000 asset, and $1,600,000 R&D expenses
c. $1,600,000 asset, and $7,500,000 R&D expenses
d. $6,300,000 asset, and $2,800,000 R&D expenses