Reference no: EM13489972

1. Fences and parking lots are reported on the balance sheet as
a. current assets.
b. land improvements.
c. land.
d. property and equipment.

2. When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to
a. the total interest cost actually incurred.
b. a cost of capital charge for stockholders' equity.
c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
d. that portion of average accumulated expenditures on which no interest cost was incurred.

3. Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has
a. no commercial substance and additional cash is paid.
b. no commercial substance and additional cash is received.
c. commercial substance and additional cash is paid.
d. commercial substance and additional cash is received.

4. In accounting for plant assets, which of the following outlays made subsequent to acquisition should be fully expensed in the period the expenditure is made?
a. Expenditure made to increase the efficiency or effectiveness of an existing asset
b. Expenditure made to extend the useful life of an existing asset beyond the time frame originally anticipated
c. Expenditure made to maintain an existing asset so that it can function in the manner intended
d. Expenditure made to add new asset services

Use the following information for questions 29 and 30.

Wilson Co. purchased land as a factory site for $800,000. Wilson paid $80,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect's fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,500,000. An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000.

5. The cost of the land that should be recorded by Wilson Co. is
a. $880,480.
b. $886,880.
c. $889,880.
d. $896,280.

6. The cost of the building that should be recorded by Wilson Co. is
a. $2,503,800.
b. $2,504,840.
c. $2,513,200.
d. $2,514,240.

Use the following information to answer questions 31 - 35.

Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,000,000 on March 1, $3,300,000 on June 1, and $5,000,000 on December 31. Arlington Company borrowed $2,000,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,000,000 note payable and an 11%, 4-year, $7,500,000 note payable.

7. What are the weighted-average accumulated expenditures?
a. $7,300,000
b. $5,258,333
c. $12,300,000
d. $6,150,000

8. What is the weighted-average interest rate used for interest capitalization purposes?
a. 11%
b. 10.85%
c. 10.5%
d. 10.65%

9. What is the avoidable interest for Arlington Company?
a. $240,000
b. $773,013
c. $273,802
d. $587,012

10. What is the actual interest for Arlington Company?
a. $1,465,000
b. $1,485,000
c. $1,225,000
d. $587,012

11. What amount of interest should be charged to expense?
a. $637,987
b. $1,225
c. $877,987
d. $691,987

12. Rogers Co. had a sheet metal cutter that cost $144,000 on January 5, 2008. This old cutter had an estimated life of ten years and a salvage value of $24,000. On April 3, 2013, the old cutter is exchanged for a new cutter with a fair value of $72,000. The exchange lacked commercial substance. Rogers also received $18,000 cash. Assume that the last fiscal period ended on December 31, 2012, and that straight-line depreciation is used.

Instructions
(a) Show the calculation of the amount of the gain or loss to be recognized by Rogers Co.
(b) Prepare all entries that are necessary on April 3, 2013.