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1. On January 1, 2018, Pine Cone Designs purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for $240,000. While the patent had a remaining legal life of 15...

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1.   On January 1, 2018, Pine Cone Designs purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for $240,000. While the patent had a remaining legal life of 15 years at the time of purchase, Pine Cone expects the useful life to be only eight more years. In addition, Pine Cone purchase equipment related to production of the new clothing for $140,000. The equipment has a physical life of 10 years but Pine Cone plans to use the equipment only over the patent's service life and then sell it for an estimated $20,000. Pine Cone uses straight-line for all long-term assets. The amount to expense in 2021 related to the patent and equipment should be
    
    A. $40,000.
    B. $31,000.
    C. $45,000.
    D. $38,000.
    2.   On June 30, 2011, Grazie Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During the six months of 2011, 24,000 units of product were produced. At the beginning of 2012, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2012, 70,000 units were produced. Grazie would report depreciation in 2012 of
    
    A. $105,000.
    B. $108,000.
    C. $126,000.
    D. $135,230.
    3.   In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if
    
    A. the book value of the equipment received exceeds the fair value of the equipment given up.
    B. the book value of the equipment su
endered exceeds the fair value of the equipment given up.
    C. the fair value of the equipment received exceeds the book value of the equipment received.
    D. the fair value of the equipment su
endered exceeds the book value of the equipment given up.
    4.   On January 1, 2018, Mites, Inc., acquired land for $6.2 million. Mites paid $1.2 in cash and signed a 6% note requiring the company to pay the remaining $5 million plus interest on December 31, 2019. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For what amount should Mites record the purchase of land?
    
    A. $6.2 million
    B. $5.0 million
    C. $5.6 million
    D. $6.8 million
    5.   Clayton Manufacturing Co. purchased a 10-ton draw press at a cost of $180,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is
    
    A. $185,760.
    B. $187,600.
    C. $183,600.
    D. $171,000.
    6.   Mona and Lisa Corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely furnished. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and furniture and fixtures, respectively. What would the initial values of the building, land, and furniture and fixtures be?
    
    A. Building: $1,200,000, Land: $720,000, Fixtures: $480,000
    B. Building: $1,300,000, Land: $780,000, Fixtures: $520,000
    C. Building: $1,100,000, Land: $900,000, Fixtures: $500,000
    D. Building: $ 720,000, Land: $1,200,000, Fixtures: $480,000
    7.   Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?
    
    A. $4.5 million
    B. $12 million
    C. $16.5 million
    D. $8.25 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.   Kingston Corporation has $95 million of goodwill on its books from the 2016 acquisition of Reliant Motors. At the end of its 2018 fiscal year, management has provided the following information for its required goodwill impairment test ($ in millions):
    Fair value of Reliant (approximates fair value less costs to sell)
    $655
    Fair value of Reliant's net assets (excluding goodwill)
    600
    Book value of Reliant's net assets (including goodwill)
    700
    Present value of estimated future cash flows
    670
Assuming that Reliant is considered a reporting unit for United States GAAP and a cash-generating unit for IFRS, the amount of goodwill impairment loss that Kingston should recognize according to United States GAAP and IFRS, respectively, is
    
    
    
    
    
    
    
    
    
    
    A. United States GAAP: $0; IFRS: $30 million.
    B. United States GAAP: $40 million; IFRS: $30 million.
    C. United States GAAP: $45 million; IFRS: $45 million.
    D. United States GAAP: $55 million; IFRS: $45 million.
    
    
    
    
    
    
    
    
    
    9.   Lisor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,000,000. The building included used but functional equipment.
According to independent appraisals, the fair values were $4,500,000, $3,000,000, and $2,500,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be
    
    A. Building: $3,600,000, Land: $3,000,000, Equipment: $500,000
    B. Building: $4,500,000, Land: $3,000,000, Equipment: $2,500,000
    C. Building: $4,500,000, Land: $3,000,000, Equipment: $500,000
    D. Building: $3,600,000, Land: $2,400,000, Equipment: $2,000,000
    10.   Sublim Advertising, Inc., reported the following in its December 31, 2011, balance sheet:
    Equipment
    $500,000
    Less: Accumulated depreciation—equipment
    $135,000
In a disclosure note, Sublim indicates that it uses straight-line depreciation over 10 years and estimates salvage value at 10% of cost. What's the average age of the equipment owned by Sublim?
    
    A. 2.7 years
    B. 7.3 years
    C. 7 years
    D. 3 years
    11.   Long Corporation purchased Stoveway, Inc., for $52,000,000. The fair value of all Stoveway's identifiable tangible and intangible assets was $48,000,000. Long will amortize any goodwill over the maximum number of years allowed. What's the annual amortization of goodwill for this acquisition?
    
    A. $0
    B. $100,000
    C. $200,000
    D. $400,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.   On June 1, 2017, the Refract Company began construction of a new manufacturing plant. The plant was completed on October 31, 2018. Expenditures on the project were as follows ($ in millions):
    July 1, 2017
    54
    October 1, 2017
    22
    Fe
uary 1, 2018
    30
    April 1, 2018
    21
    September 1, 2018
    20
    October 1, 2018
    6
On July 1, 2017, Refract obtained a $70 million construction loan with a 6% interest rate. The loan was outstanding through the end of October, 2018. The company's only other interest-bearing debt was a long-term note for $100 million with an interest rate of 8%. This note was outstanding during all of 2017 and 2018. The company's fiscal year-end is December 31. What's the amount of interest that Refract should capitalize in 2017, using the specific interest method?
    
    
    
    
    
    
    
    
    
    
    A. $2.12 million
    B. $2.96 million
    C. $1.90 million
    D. $1.95 million
    
    
    
    
    
    
    
    
    
    13.   On March 31, 2011, M. Roccia purchased the right to remove gravel from an old rock qua
y. The gravel is to be sold as roadbed for highway construction. The cost of the qua
y rights was $164,000, with estimated salable rock of 20,000 tons. During 2011, Roccia loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at December 31, 2011. At January 1, 2012, Roccia estimated that 20,000 tons still remained. During 2012, Roccia loaded and sold 8,000 tons. Roccia would record depletion in 2011 of
    
    A. $30,750.
    B. $32,800.
    C. $24,600.
    D. $41,000.
    14.   Deloits Consulting Co. reported the following on its December 31, 2011, balance sheet:
Equipment (at cost) . . . $700,000
In a disclosure note, Deloits indicates that it uses straight-line depreciation over five years and estimates salvage value as 10% of cost. Deloits's equipment averages 3.5 years at December 31, 2011. What's the book value of Deloits's equipment at December 31, 2011?
    
    A. $441,000
    B. $490,000
    C. $210,000
    D. $259,000
    15.   Excess Software began a new development project in 2010. The project reached technological feasibility on June 30, 2011, and was available for release to customers at the beginning of 2012. Development costs incu
ed prior to June 30, 2011, were $3,200,000 and costs incu
ed from June 30 to the product release date were $1,400, XXXXXXXXXXrevenues from the sale of the new software were $4,000,000 and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2012 amortization of the software development costs would be
    
    A. $560,000.
    B. $0.
    C. $350,000.
    D. $1,840,000.
    
16.   Raccoon & 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 at and a gain/(loss) of
    
    A. Equipment: $108,000; gain/(loss): $16,000.
    B. Equipment: $99,000; gain/(loss): $(25,000).
    C. Equipment: $106,000; gain/(loss): $(9,000).
    D. Equipment: $99,000; gain/(loss): $(16,000).
    17.   The balance sheets of Ruseki Corporation reported net fixed assets of $320,000 at the end of 2011. The fixed-asset turnover ratio for 2011 was 4.0 and sales for the year totaled $1,480,000. Net fixed assets at the end of 2010 were
    
    A. $370,000.
    B. $420,000.
    C. $470,000.
    D. $320,000.
    18.   The replacement of a major component increased the productive capacity of production equipment from 10 units per hour to 18 units per hour. The expenditure should be debited to
    
    A. repairs expense.
    B. equipment.
    C. maintenance expense.
    D. gain from repairs.
    19.   A _______ is an exclusive copyright to manufacture a product
Answered Same DayDec 25, 2021

Solution

Pallavi answered on Dec 30 2021
58 Votes
Questions
    Answers
    1
    C
    2
    A
    3
    C
    4
    A
    5
    B
    6
    A
    7
    D
    8
    C
    9
    D
    10
    D
    11
    D
    12
    A
    13
    B
    14
    A
    15
    C
    16
    D
    17
    A
    18
    B
    19
    B
    20
    D
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