Reference no: EM133184646

Questions -

Q1) Alpha Co. purchased land as a factory site for $800,000. Alpha paid $100,000 to tear down a building on the land. Brokerage fees of $3,000 were paid for acquisition of land and making the purchase. Architect's fees were $20,000. Removal of old building cost $8,000, and liability insurance during construction cost $4,000. Excavation cost $20,000. The contractor was paid $2,000,000. An assessment made by the city for drainage was $20,000. Land improvements (permanent) were $70,000. The cost of the land that should be recorded by Alpha Co. is?

Q2) Beta Company purchased equipment for $75,000. The purchase was subject to a 2% discount which was taken. Sales tax on the purchase was 8%. Other costs incurred were freight charges of $500 and installation cost of $2,000. What is the cost of the equipment?

Q3) ABC Inc. and XYZ Co. have an exchange of nonmonetary assets with no commercial substance. The asset given up by ABC Inc. has a book value of $320,000 and a fair value of $400,000. The asset given up by XYZ Co. has a book value of $520,000 and a fair value of $560,000. Boot of $160,000 is received by XYZ Co. What amount should ABC Inc. record for the asset received?

Q4) Trinity Company depreciates buildings using the straight-line method. It depreciates all vehicles using the double-declining balance method and depreciates equipment based on machine hours used. According to GAAP, these procedures violate the consistency principle. (True/False)

Q5) In an exchange of nonmonetary assets in which there is commercial substance, the asset received will always be valued at the book value of the asset given up regardless of whether boot is involved and will recognize all gains and losses. (True/False)

Q6) Depreciation expense on plant and equipment, depletion expense on natural resources and amortization expense on intangibles will all be disclosed on the income statement as an operating expense. (True/False)

Q7) Limited-life intangibles are amortized over their economic life or legal life whichever is longer. (True/False)

Q8) Royalty payments paid to the inventor of a machine during its use should be capitalized as a cost of acquisition. (True/False)

Q9) Conservatism would allow the recognition of a loss on the voluntary sale of a plant asset but would not allow the recognition of a gain. (True/False)

Q10) In all methods of depreciation acceptable by GAAP, salvage value is subtracted in determining annual depreciation expense. (True/False)